Why is it in the news?
- The Department of Economic Affairs (Ministry of Finance) released a report titled ‘The Indian Economy: A Review’ assessing the state and trajectory of the Indian economy over the past decade and its future outlook.
Key Challenges faced by Indian Economy
- Geoeconomic Fragmentation and Slowdown of Hyper-Globalization: Increased fragmentation in the global economy poses challenges to India’s economic growth and international trade relationships.
- Trade-off between Energy Security and Economic Growth vs. Energy Transition: India faces the dilemma of balancing energy security and economic growth against the imperative for energy transition towards sustainability.
- Human Capital Development: Ensuring the availability of a talented and appropriately skilled workforce is crucial for sustaining economic growth. Emphasis on achieving age-appropriate learning outcomes in schools at all levels to nurture a skilled workforce.
- Impact of Artificial Intelligence (AI): The advent of AI presents both opportunities and challenges for the Indian economy. An IMF paper estimated that 40% of global employment is exposed to AI, highlighting the need for strategic adaptation and workforce reskilling.
Factors Contributing to Indian Economy’s Resilience
- Domestic Economy: Projected growth rate of over 7% in the next three years, positioning India as the third-largest economy globally with a GDP target of $5 trillion. Robust Digital Public Infrastructure has transformed the authentication ecosystem, significantly reducing e-KYC costs.
- Macroeconomic Stability: Establishment of the Price Stabilization Fund (PSF) in 2014-15 has effectively managed price volatility in the economy.
- Human Resources: Significant reduction in multidimensional poverty with 13.5 crore Indians escaping poverty between 2015-16 and 2019-21. Further, remarkable increase in Female Labour Force Participation Rate (LFPR) from 23.3% in 2017-18 to 37% in 2022-23.
- India’s External Sector: India emerges as the largest recipient of worker remittances globally, receiving USD 125 billion in 2023. External debt as a ratio to GDP declined to 18.6% by September 2023 from 22.4% in 2013.
