Problems Facing Indian Economy
Since 1991, the Indian economy has pursued free market liberalisation, greater openness in trade and increase investment in infrastructure. This helped the Indian economy to achieve a rapid rate of economic growth and economic development. However, the economy still faces various problems and challenges, such as corruption, lack of infrastructure, poverty in rural areas and poor tax collection rates.
GDP per capita (in 1990 Geary-Khamis dollars) (data range 1950-2003)
What is the biggest economic problem in India?
Its population has grown 20% per decade, leading to problems that include food deficits, sanitation deterioration, and pollution. Although economic growth numbers look promising, the living standards of most citizens are not changing.
Here are the eight challenges that India is facing
India is facing the worst water crisis in history. Nearly half the population is struggling with drought-like conditions.
1. Worsening Water Nightmare
India is facing the worst water crisis in history. Nearly half the population is struggling with drought-like conditions. This year, rainfall in western and southern states is below average.
The NITI Aayog has warned that the demand for drinking water will outstrip supply by 2030 if preventive steps are not taken.
The NITI Aayog has warned that the demand for drinking water will outstrip supply by 2030 if preventive steps are not taken.

Nearly 600 million Indians suffer from high to extreme water stress. About 2,00,000 deaths per year are attributed to lack of access to safe water. Experts predict that 21 big cities will run out of groundwater by 2020.
2. Fake News Menace
Misinformation, hate speech and false propaganda on social media are dividing India’s community fabric one WhatsApp message at a time.
Fact-checker Pratik Sinha believes, what gets maximum likes on Facebook goes viral at least five times more on WhatsApp.
For two years his team has been debunking thousands of fake news cases. Ahmedabad-based Sinha, co-founder of India’s leading fact-checking site AltNews, says it is the lack of digital literacy that makes fake news acceptable.
Fact-checker Pratik Sinha believes, what gets maximum likes on Facebook goes viral at least five times more on WhatsApp.
For two years his team has been debunking thousands of fake news cases. Ahmedabad-based Sinha, co-founder of India’s leading fact-checking site AltNews, says it is the lack of digital literacy that makes fake news acceptable.

3. Agrarian Catastrophe
Suicides, debt burden, falling prices of produce… India’s farm economy is in turmoil. Massive protests by farmers swept India late last year as thousands of them marched to Delhi, Kolkata and Mumbai in the last week of November alone.
An estimated 26 crore citizens work in agriculture making about 55-57percent of India’s population dependent on the sector.
Despite the government’s implementation of the new MSP regime, profitable remuneration is eluding farmers.
Agriculture contributed 21 percent to GDP in 2004-05 but has dropped to around 13 percent in the past 15 years.
An estimated 26 crore citizens work in agriculture making about 55-57percent of India’s population dependent on the sector.
Despite the government’s implementation of the new MSP regime, profitable remuneration is eluding farmers.
Agriculture contributed 21 percent to GDP in 2004-05 but has dropped to around 13 percent in the past 15 years.
4. Political Arrogance
Hua toh hua is the mantra of arrogant Congress,” PM Modi raged against Sam Pitroda’s cavalier remark on the anti-Sikh riots. Politicians consistently misuse their position to suppress cases, assault government staff, laud goons and in extreme cases even rape women and get pliant cops to intimidate.
Members of ruling parties are the worst: the misconduct of Akash Vijayvargiya and Sadhvi Pragya Thakur invited Modi’s ire. Crimelord MP Shahabuddin was called ‘bahubali’ until he was sent to jail.
An MP trashed an airline employee. Another ejected confirmed passengers from a train compartment to seat his gunmen. A law is necessary to rein in such hubris.
Members of ruling parties are the worst: the misconduct of Akash Vijayvargiya and Sadhvi Pragya Thakur invited Modi’s ire. Crimelord MP Shahabuddin was called ‘bahubali’ until he was sent to jail.
An MP trashed an airline employee. Another ejected confirmed passengers from a train compartment to seat his gunmen. A law is necessary to rein in such hubris.
5. Flood Mismanagement
Monsoon is synonymous with floods. This year, rains killed nearly 500 between April 1 and July 17. Nearly six lakh houses and over four lakh hectares of crop were damaged, according to home ministry data.

It’s the same story everywhere, every year: thousands evacuated, hundreds dead, livelihoods lost, villages and settlements washed away, houses submerged, and the authorities always caught napping.
People die even in financial capital Mumbai, which is paralysed by rain every monsoon.
6. Unemployment
Despite rapid economic growth, unemployment is still an issue in both rural and urban areas. The fast rate of economic growth has left unskilled workers behind, and they have struggled to find work in growing industries. In 2017, the official unemployment rate was just below 5%. However, a report by the OECD found over 30% of people aged 15-29 in India are not in employment, education or training (NEETs). Livemint reported on March 6, 2017. WIth, little if any government welfare support for the unemployed, it leads to dire poverty.
7. Pending Justice
Bureaucratic sloth coupled with slow settlement of cases in India’s courts is a scourge the country has to fix on priority. The 100-year-old M Kaliyan will tell you. He has been part of two struggles over a century.
The first, the Independence movement, and the second, a Kafkaesque trial for his freedom fighter’s pension. The Tamil Nadu government initially turned down his application which was passed only in 2010 after a protracted legal battle.
His application for central government pension is yet to be approved.
The first, the Independence movement, and the second, a Kafkaesque trial for his freedom fighter’s pension. The Tamil Nadu government initially turned down his application which was passed only in 2010 after a protracted legal battle.
His application for central government pension is yet to be approved.
8. Poor Policing
According to United Nations Office on Drugs and Crime, India’s ratio of 138 police personnel per lakh of population in 2013 was the fifth lowest among 71 countries.

Experts state that the archaic Indian police system doesn’t meet the requirements of a modern welfare state and reforms proposals have been pending for long.
A 2018 Lokniti team survey at the Centre for the Study of Developing Societies found that less than 25 percent of Indians trust the police highly. The distrust is mostly attributed to factors such as: interactions with the police can be frustrating, time-consuming and costly.
Problems Facing Indian Economy Are:
.Poor educational standards
Although India has benefited from a high % of English speakers, (important for call centre industry) there is still high levels of illiteracy amongst the population. It is worse in rural areas and amongst women. Over 50% of Indian women are illiterate. This limits economic development and a more skilled workforce.
.Poor Infrastructure
Many Indians lack basic amenities lack access to running water. Indian public services are creaking under the strain of bureaucracy and inefficiency. Over 40% of Indian fruit rots before it reaches the market; this is one example of the supply constraints and inefficiency’s facing the Indian economy.
.Large Budget Deficit
India has one of the largest budget deficits in the developing world. Excluding subsidies, it amounts to nearly 8% of GDP. Although it is fallen a little in the past year. It still allows little scope for increasing investment in public services like health and education.
.Rigid labour Laws
As an example Firms employing more than 100 people cannot fire workers without government permission. The effect of this is to discourage firms from expanding to over 100 people. It also discourages foreign investment. Trades Unions have an important political power base and governments often shy away from tackling potentially politically sensitive labour laws.
.Inefficient agriculture
Agriculture produces 17.4% of economic output but, over 51% of the work force are employed in agriculture. This is the most inefficient sector of the economy and reform has proved slow.
.Poor tax collection rates.
According to the Economist, India has one of the poorest tax to GDP rates in the whole world. India’s tax revenue as a % of GDP is just 12%. Compared to an EU average of 45%.
This poor tax collection rate reflects widespread corruption, tax avoidance and complicated tax rates. In 2017, Narendra Modi has sought to improve tax collection rates and reduce complications through the introduction of a general sales tax (GST) which involves a single tax rate – rather than tax rates applied multiple times at different stages of production.
.Business difficulties
According to the World Bank, the ease of doing business in India is poor. India ranks 130/190. Big issues for companies include
- Ease of enforcing contracts
- Dealing with construction contracts
- Paying taxes
- Trading across border
.Inequality within regions
India’s economic growth has benefitted some regions more than others. Technological hubs, such as Delhi and Mumbai have attracted higher-paying jobs. This has attracted an inflow of most mobile and skilled workers; this has created congestion in these super-cities but failed to address the poverty of rural areas, especially in the northeast.
.Balance of Payments deterioration.
Although India has built up large amounts of foreign currency reserves, the high rates of economic growth have been at the cost of a persistent current account deficit.
In late 2012, the current account reached a peak of 6% of GDP. Since then there has been an improvement in the current account.
But, the Indian economy has seen imports growth faster than exports. This means India needs to attract capital flows to finance the deficit. Also, the large deficit caused the depreciation in the Rupee between 2012 and 2014.
Whilst the deficit remains, there is always the fear of a further devaluation in the Rupee. There is a need to rebalance the economy and improve the competitiveness of exports.
.Inequality has risen rather than decreased.
It is hoped that economic growth would help drag the Indian poor above the poverty line.
However, so far economic growth has been highly uneven benefiting the skilled and wealthy disproportionately.
Many of India’s rural poor are yet to receive any tangible benefit from India’s economic growth. More than 78 million homes do not have electricity.
33% (268million) of the population live on less than $1 per day. Furthermore with the spread of television in Indian villages the poor are increasingly aware of the disparity between rich and poor.