India is currently the world's fifth largest economy with a gross domestic

product (GPD) of USD 3.5 trillion. In comparison, the US is a USD 23 trillion

economy with a stock market capitalization ranging from USD 45 to 50
trillion.India was the one of the largest economies in the world, for about two
and a half millennia starting around the end of 1st millennium BC and ending
around the beginning of British rule in India

WHO IS FATHER INDIAN ECONOMY?

Detailed Solution. PV Narasimha Rao is known as the 'Father of Indian
Economics Reforms'. He served as the 10th Prime Minister of India from 1991
to 1996.

HOW DID INDAIN ECONOMY BEGGING

For almost two and a half millennia, beginning at the end of the first
millennium BC and ending at the start of British administration in India, India
had one of the greatest economies in the world. [1]
The Mahajanapadas produced silver coins with punch marks around 500 BC.
Urban development and intense commerce activity characterised the time. The
majority of the Indian subcontinent, including Tamilakam, which was
controlled by Three Crowned Kings, had been united by the Maurya Empire by
300 BC. A common economic system, improved trade, and more commerce
were made possible by the subsequent political unification and military
security, which also increased agricultural output.

By the end of the 17th century, the Mughal Empire had united the majority of
the Indian subcontinent. For a brief period, it was the largest manufacturing
and economic force in the world, contributing about a quarter of the world's
gross domestic product (GDP), before disintegrating and being conquered over
the course of the following century.

The Kingdom of Mysore became a significant economic force by the 18th

century thanks to the Mysoreans' ambitious economic development plan.
Sivramkrishna estimated the aggregated millet revenue at roughly five times
subsistence level after examining agricultural surveys done in Mysore by
Francis Buchanan in 1800–1801. He did this by utilising a "subsistence basket"
as a benchmark. The Maratha Empire also executed a successful taxation and
administration strategy throughout the principal territories it governed and
collected chauth from vassal nations.

CHALLENGES FACED BY THE INDIAN ECONOMY

There are different challenges that the Indian economy faces. Here are they:

Population Density
The population density of India is one of the highest in the world. This
population density, coupled with Indian infrastructure which is not able to
keep up with the population growth, is one of the main problems that the
Indian economy faces.
Poverty Problems
Another challenge faced by the Indian economy is poverty. Nearly 22% of the
population lives below the poverty line. This means that a large portion of the
population is not able to participate in the economy and this leads to a vicious
cycle of poverty.

Unemployment
Unemployment is another big challenge that the Indian economy faces. The
unemployment rate in India is at a 45-year high. This means that there are a lot
of people who are not able to find jobs. This leads to a lot of social problems as
well.

Payment Deterioration
One of the most recent challenges faced by the Indian economy is payment
deterioration. This is caused by the delay in payments from the government to
contractors and suppliers. This has led to a lot of financial problems for the
contractors and suppliers.

Poor Education
Another challenge that the Indian economy faces is poor education. The
literacy rate in India is only around 74%. This means that a lot of people are not
able to get good jobs and participate in the economy. This leads to a lot of
social problems as well.

Private Debt
Another challenge faced by the Indian economy is private debt. The private
debt to GDP ratio in India is one of the highest in the world. This means that a
lot of people have taken out loans and are not able to repay them. This leads
to a lot of financial problems for the economy.
Fixed Labour Laws
Another challenge faced by the Indian economy is fixed labour laws. These
laws make it very difficult for companies to lay off workers. This leads to a lot
of inefficiency in the economy and leads to a lot of financial problems for the
companies.

Inadequate Infrastructure
One of the biggest challenges faced by the Indian economy is inadequate
infrastructure. The infrastructure in India is not able to keep up with the
population growth. This leads to a lot of problems such as traffic jams, power
cuts, and water shortages.

Corruption
Corruption is another big challenge faced by the Indian economy. Corruption
leads to a lot of inefficiency and waste in the economy. It also leads to a lot of
social problems as well.

These are some of the challenges faced by the Indian economy. Population
density, poverty problems, unemployment, payment deterioration, poor
education, and private debt are some of the main challenges. These challenges
need to be addressed in order to make the Indian economy stronger.

How To Improve Indian Economy

Tax refrm

The Indian government's spending far outpaces its income. The term for this is
fiscal deficit. The government's failure to meet goals for tax revenue collection
is a major factor in this. In a fresh analysis of the Indian economy, the OECD
recommended "implementing a national value-added tax (GST) with only
limited exclusions." The Goods and Services Tax (GST) has long been planned.
It proposes to substitute a single tax for the current convoluted indirect
taxation structure. The GST is anticipated to simplify and improve the
effectiveness of the tax system. Additionally, the Direct Tax Code (DTC), which
seeks to replace the existing direct tax system, must be put into effect. On the
generated goods and services, both businesses and customers pay indirect tax.
This is distinct from income tax, which is a type of direct tax.
Subsidy reform:

Subsidies account up a sizable amount of government spending. This is the

sum that the government pays businesses in exchange for artificially low prices
on goods like food and petrol. This has an impact on how much money the
government can spend on beneficial things like building new infrastructure.
This is referred to as capital expenditure and is a significant factor in economic
expansion. According to the OECD, spending on subsidies should be cut while
capital expenditures should increase. Long-term economic growth would be
aided by this.

Reform of the banking system:

The Indian economy is supported by its banking sector. In the industry, the
government is a significant player. Public sector banks that are owned by the
government hold close to 70% of all banking assets. The least profitable banks
are those in the public sector, nevertheless. The increase in subprime loans is a
major factor in this. Therefore, the government is forced to utilise tax dollars,
which could have been used to spur economic growth, to pay for these loans.
In order to help banks identify problematic loans early on, a sound policy must
be put in place. The sector should also be liberalised with minimal government
interference, according to the OECD.

Creating jobs:

The hiring industry was one of the worst affected as the economy slowed
down. According to the OECD report, job creation has been modest. The
unemployment rate has not increased as of yet. But from 88 million in 2010, it
is anticipated that there would be 113 million workable persons by 2020. The
difference between the number of jobs created and the number of job seekers
would decrease over time. This is true despite the fact that among rising
countries, women make up one of the smallest percentages of the labour
force. In India, fewer than one-third of all women of working age are
employed. Additionally, the atmosphere does not encourage women to work.
Additionally, the unorganised sector and small businesses are where more jobs
are being produced. Many labour rules, such as the Employment Protection
Legislation, do not apply to these. This indicates a low level of overall quality of
life. Long-term growth may be impacted by this.

According to the OECD, India's infrastructure, particularly its access to power,

is subpar. As a result, the report stated that certain industries, particularly
manufacturing, have experienced slower growth. Many government initiatives
to upgrade the infrastructure have been put off or delayed. India has made the
highest infrastructure investments among low- and middle-income nations
during the past five years. Still, more work needs to be done. The OECD
advised imposing precise deadlines, streamlining documentation, and
implementing single-window clearance in the infrastructure sector.
\

SCHEMES FOR A BETTER ECONOMY

Pradhan Mantri Jan Dhan Yojna (PMJDY):
A national mission for financial inclusion, PMJDY aims to increase access to
low-cost financial services like insurance, pensions, savings and deposit
accounts, remittance, and credit. The programme was unveiled in 2014 by
Prime Minister Narendra Modi on the eve of Independence Day.

Sukanya Samriddhi Yojna (SSY)

On January 22, 2015, as part of the "Beti Bacho, Beti Padhao" campaign,
Narendra Modi introduced the Sukanya Samridhi programme. The purpose of
this programme is to cover a girl's costs for college and marriage.
Rashtriya Swasthya Bima Yojana (RSBY):

This scheme was introduced in 2008. Its main motto is to provide health
insurance coverage to people belonging to the BPL (Below Poverty Line)
category.

National Social Assistance scheme

Launched in 1995, this is a centrally sponsored scheme aimed at providing

financial assistance to the elderly, widows, and people with disabilities in the
form of social pensions.

Pradhan Mantri Mudra Yojana

Micro Units Development & Refinance Agency Ltd. (MUDRA) is a new initiative
designed for non-corporate, non-form sector, micro and small enterprises
whose credit needs are below Rs. 10 lakhs. This scheme was announced by the
Finance Minister during the Union Budget 2016. Under PMMY there are three
products available:

Characteristics of the Indian Economy

Low real income per capita:

The purchasing power or purchasing force of the entire

country as a whole during a specific fiscal year is
referred to as the real income or revenue of any
country. And the average purchasing power of every
person in the nation for the nation in the given fiscal
year is the per capita real income. The actual per capita
income of emerging countries is often lower than that
of wealthy countries. Low real per capita income is
another characteristic of the Indian economy.

Greater population growth rate:

India currently has the second-highest population in

the world, behind China. India is home to almost 1.3
billion people. Because of the high population, the
available resources would need to be divided among
many people, resulting in fewer resources for each
individual.The population is expanding at an ever-
faster rate. As a result, not enough people have access
to employment opportunities. This indicates that a
sizable section of the population is unemployed, which
explains why a sizable portion of Indians live below the
poverty line.Low income per capita is another
consequence of this. As a result, the Indian population
suffers as a result of the population's rising growth
rate.

being reliant on the primary sector

People in developing nations like India must turn
to the primary sectors when there are no fresh
job prospects accessible. These industries cover a
variety of centuries-old professions including
farming, raising cattle, etc.

They do not make as much money from these

areas as they do from other wealthy countries'
sectors. Because of its dependence on the
primary sectors, the Indian economy is hence
weaker.

Impact of Covid 19 on the Indian

economy
 A notified disaster

Government of India as well as State governments are treating and monitoring the situation
closely to control the coronavirus pandemic. The Ministry of Home Affairs has decided to
treat Covid-19 as a "notified disaster". This will enable the states to spend a larger chunk of
funds from the State Disaster Response Fund (SDRF) to fight the pandemic.

 GDP

The revised Gross Domestic Product (GDP) estimates for India downwards by 0.2 percentage
points for the fiscal year 2020 to 4.8 per cent and by 0.5 per cent for the fiscal year 2021 to 6
per cent. Further, it is stated that the extent of the actual impact will depend upon the severity
and duration of the outbreak.

 Loss of Jobs

With an increasing number of coronavirus cases, the government has locked down transport
services, closed all public and private offices, factories and restricted mobilization. Based on
recent studies, some economists have said that there is a job loss of 40 million people (MRD
report) in the country, mostly in the unorganized sectors. In this scenario, they are predicting
that India would go into recession affecting the unorganized sector and semi-skilled
jobholders losing their employment.
Indian Economy: States of aftermath

 Not all states saw their gross domestic product (GDP) shrink in fiscal

2021, leading to a differing permanent loss of GDP across states by

fiscal 2022

 In terms of growth (before Covid-19 and with the pandemic-induced hit),

the better placed states appear to be Bihar, Tamil Nadu, West Bengal,

and Andhra Pradesh. Kerala, Maharashtra, Uttar Pradesh, Punjab,

Rajasthan, Odisha, Jharkhand, and Madhya Pradesh are relatively worse

off

 Agriculture did cushion the pandemic’s impact on growth among states.

This implies generally states with a higher share in their GDP of

agriculture contracted less in fiscal 2021

 States with a relatively larger dependence on contact-intensive services,

on the other hand, got hit more during the pandemic

 Interestingly, the pandemic-induced hit to growth among states has not

led to a divergence in that low-income states do not appear to have been

harder hit

 The sharp rise in inflation in the current fiscal has been mirrored in most

states. So far this fiscal, 13 large states recorded higher inflation than

the national average, with Telangana, Maharashtra and West Bengal

 recording the highest inflation. Most states facing maximum inflation are

the richer states

 Fiscal stress, as measured by debt-deficit levels, has increased across

states during the past two years. Bihar, Kerala, Punjab, and Rajasthan

are especially fiscally vulnerable, and their debt (as a percentage of

gross state domestic product) is projected to be the highest among

states in this fiscal as well. Finances of Andhra Pradesh, Bihar, Kerala,

Madhya Pradesh, Punjab, Rajasthan, and West Bengal worsened, with

debt/GDP crossing 35%