Many challenges to the race towards economic growth

- After the 1990s reforms, private sector intervention increased and sectors like banking, finance and civil aviation also gained momentum.

If India becomes the third largest economy in the world, it will be a remarkable achievement. Economic growth in India has been a topic of discussion in the last three-four decades. The pace of economic growth increased from 2.5 percent in 1970 to 5.5 percent in 1980. A middle class emerged during this time. This led to demand for many types of consumer goods. It included everything from daily use items to durable goods. The automobile industry also benefited greatly and saw a flurry of models ranging from small cars like the Maruti to modern two-wheelers.

The next phase began in the 1990s when the infotech boom and a period of technological change began. India's economic engineering labor force went to work abroad. There were also changes in the patent system etc. and these changes only provided an opportunity for the pharmaceutical industry to take advantage of the US generic market and grow rapidly.

These sectors created a boom in exports which became another factor of growth. After the reforms of the 1990s, private sector intervention increased and sectors such as banking, finance and civil aviation also gained momentum. This has led to increased demand in areas such as accommodation, car buying and travel.

If growth has slowed in recent years, it is because no sector has emerged to play the role of top cyclist. Meanwhile, the pharmaceutical sector lost its momentum prematurely due to poor business practices and failures on the regulatory front. Now the infotech boom has slowed down and it has matured.

Back to back shocks like demonetisation, covid affected domestic consumer demand. For example, sales of two-wheelers stagnated. One reason may also be that the consumer debt burden is now too high for India's income level. Meanwhile, merchandise exports have also performed poorly in the past decade. The economy is also failing to create a competitive manufacturing base and we are lagging behind Vietnam and Bangladesh.

The question here is which sector will lead India's next phase of development? The government has bet big on the area of ​​failure and that is manufacturing. The 'Make in India' initiative has failed to deliver the expected results. The question then is what are the financial incentives for investment and production? While awaiting the results of this import substitution initiative, the engine of growth has been kept going with the help of large government investment in physical infrastructure. Due to this private investment continues in allied sectors like metals and cement.

Investment in infrastructure sector and promotion of manufacturing sector will put pressure on government finances. More importantly, most new initiatives are capital intensive in nature. This means that we will constantly need new capital to increase production. Such growth will also greatly limit employment. In such a situation, consumption will slow down and growth will slow down. But in a slowing world economy, India needs to grow at a faster rate of 5.5 to 6 percent to keep foreign investment flowing.

India can expect to grow enough over the next five years to overtake Japan's stagnant economy and Germany's slow-growing economy. Thus, it will become the third largest economy in the world, which will be a remarkable achievement. This work can be done without much effort. But the real important question is whether India will be able to get rid of multi-dimensional poverty. The concept of poverty is related to minimum income, education and quality of life (drinking water, sanitation and electricity).