Economic prosperity is heavily dependent on fundamental strength of economic system of a country. The rising economic problems in India have their roots in a fundamentally weak economic system.
Causes:
Declining consumer demand- India talks about its high domestic demand. As per latest data, consumer demand in India’s rural areas is steadily on a decline due to rising unemployment and overdependence of people on agriculture. The fundamental rule in economics is that people must move out of agriculture, into higher paying jobs in manufacturing and services. The same has not happened in India.
Lack of a robust Banking sector- Banking sector of any country can make or break it’s economic prosperity. In India, the banking sector has been under constant stress due to policy mistakes and lack of independence, along with professionalism. NPAs have been hovering above 10% for majority of the past half a decade, proving the weakness of banks’ core activity.
Imbalance between demand and supply- India should be producing for the world and consuming of the world’s products. In reality, India is producing for itself and consuming of the world’s products. We import heavily, export little and depend too much on other countries for basic needs of a modern country.
Instability in oil- A sudden rise in oil prices means doom for Indian economy. India is still heavily dependent on oil, despite having technology to shift aggressively towards solar and nuclear energy.
Lack of skilled workforce- Every economy is made through its people. A skilled workforce, which can earn well and contribute towards economic development through its productivity only can result in economic robustness.
Over focus on economic growth and neglecting economic development- India has been lately obsessed with economic growth. Sustainable growth can only be achieved through economic development, which is often neglected in India’s policy decisions. For ex- As per RBI, demonetization has failed to generate any long term benefit to the economy because 99% of the cash in the economy came back to the banks after demonetization.
There are various other internal and external reasons behind the consistent economic problems in India. The solution of all of these is to strengthen our basics- more educated & skilled people, better manufacturing & service sector, focus on futuristic technologies like solar energy, modern waste management etc. If we can be positive about correcting our basic economic problems, we can transform ourselves into a global economic leader.