India's economy is growing fast. The size of the economy is roughly $ 3.5 trillion dollars as of now and is set to grow to $ 7.3 trillion dollars by 2030. According to Standard & Poor Global Market Intelligence, this rapid pace of change will make India surpass Japan and Germany by 2030 making it the third-largest economy in the world. According to the IMF, this may happen by 2027. The fast pace of economic expansion will also lead to a doubling of per capita income by 2030.
This is a good part of the story. But higher economic growth brings its own challenges on political, economic, social, and environmental fronts. These challenges, if they go unaddressed, may derail the growth and overall well-being of the country.
What are these challenges?
- Regional inequality which India is experiencing may create a bigger danger. Southern and western states have higher economic growth rates with innovative manufacturing and services. These regions have lower population growth rates, and they contribute most to the kitty of central taxes which the government spends on backward eastern and northern states. In 2026, the delimitation of the parliament constituency will also lead to uproar if that happens based on the size of the population. The number of seats in North and Eastern states will increase. While absolute poverty will go away by 2030, the relative poverty will accentuate the caste and religious struggle. The economic and power struggle in the name of caste and religion does not bode well for the well-being and harmony of Indian society.
- Economic Challenges are many. Spreading economic growth in all regions and all strata of society would remain the major challenge. The way technological disruption is happening, jobless growth is becoming more pronounced with the winner-takes-all capitalistic model in place. The quality of the economic growth rate matters most too. If economic growth promotes crony capitalism, we can see the more vulgar display of money, leading to social aberrations, and political deformities. The rise of gun violence that you see in the US may be the norm.
- Social Challenges of breaking up of families, increasing divorce rate, single-parent families, and elderly people not being taken care of by the family members. It will be an uphill task for the government to put in place an old age home for the elderly with an increasingly aging population and a social security system for taking care of single-parent families.
- The biggest challenge will be environmental. With the current level of economic activity, our cities are becoming unlivable with the worst level of air and water pollution. Without an effort to reimagine economic activities as green activity, the whole economic growth will be meaningless if the quality of life deteriorates. The current path based on fossil fuel and coal is quite destructive, undermining development. The debate between climate action and economic growth is a false one. Investment for energy transition and climate action is about investment for future development.
- There are reasons for hope as the government is moving in the right direction. There is a big expansion of renewable energy. Both Tata and Reliance are now leading the race on green hydrogen and green steel. The expansion of financing of green activities will lead to seeing the needle moving in the right direction.
- Digitalization, Artificial Intelligence, Climate action, and green activities will determine the quality of our economic growth and life. Energy, Steel, Cement, Transport, building construction, and Town planning need major overhauls to see that India's economy is on the path of a net zero emission economy.
- Lastly, there must be stress on water conservation. One estimate says that if we conserve 33% of Monsoon rains, Every Indian will get 2000 L of water every day. But the challenge will remain to put the systems in place. The same goes for waste disposal and plastics.
- Higher economic growth should lead to a better quality of life for every citizen. The economy will produce resources, but challenges will remain surmount the transition in all spheres of activities.