Daily Current Affairs : 22-October-2024
At the recent Annual India Leadership Summit in New Delhi, discussions highlighted India’s rapidly growing economy and its increasing global influence. With a projected 7% GDP growth in FY 2024-25, India is positioned as the fastest-growing major economy, surpassing China’s historical economic dominance. This growth is fueled by India’s digital innovations, market reforms, and an emerging startup ecosystem.
Key Drivers of India’s Economic Growth
1. Robust GDP Growth:
- India’s GDP is expected to grow by 7% in FY 2024-25, making it the fastest-growing major economy globally (World Bank, 2023).
- This steady growth reflects strong economic fundamentals and successful policy reforms.
2. Digital Transformation:
- India’s digital landscape is evolving rapidly, with the number of UPI transactions skyrocketing from 92 crore in FY 2017-18 to 13,116 crore in FY 2023-24 (Digital India, 2024). This surge highlights the country’s move towards a cashless, digital economy, making financial transactions more seamless and inclusive.
3. Growing Startup Ecosystem:
- India is now the third-largest startup hub globally, with 151,000 recognized startups. From 2015-2022, investments in Indian startups grew by 15 times, reflecting an entrepreneurial boom (Startup India, 2023).
4. Financial Inclusion:
- Programs like the PM Jan Dhan Yojana (PMJDY) have opened over 53 crore bank accounts, ensuring millions of previously unbanked people are now included in the formal financial system (Government of India, 2024).
Comparing India and China’s Economic Trajectories
India and China have been key players in Asia’s economic rise, but their current growth trajectories show some distinct differences:
- GDP Growth: India’s GDP is expected to grow at 7% in 2024-25, while China’s growth is projected at a lower 4.8% (World Bank, 2023).
- Market Performance: Indian stock markets have shown a strong 15% compound annual growth rate (CAGR) over the last five years, whereas Chinese markets have underperformed, with near-zero or negative growth (SEBI, 2024).
- Digital Growth: India’s digital finance ecosystem is thriving, as seen in the rapid increase in UPI transactions. In contrast, although China’s digital payments system is advanced, its growth has been slower than India’s.
- Startup Ecosystem: India boasts 151,000 startups, making it the third-largest globally, while China’s startup ecosystem has faced challenges due to regulatory crackdowns (Startup India, 2023).
- Demographics: India benefits from a younger population with a favorable dependency ratio, whereas China is grappling with an aging population that poses economic challenges (UN, 2024).
Challenges Faced by India
While India’s economic growth is promising, several challenges remain:
- Infrastructure Deficiency: India still faces significant infrastructure gaps, particularly in rural areas, which hinder overall productivity and growth potential (World Bank, 2023).
- Unemployment Issues: Despite a growing economy, high unemployment, especially in the formal sector, remains a major challenge, necessitating focused efforts to generate quality jobs (ILO, 2023).
- Income Inequality: The benefits of India’s economic growth are not evenly distributed. Large segments of the population remain excluded from the country’s prosperity (Oxfam, 2023).
- Educational Gaps: While India’s education system has made strides, there are still significant gaps in quality and access, especially in rural and underprivileged areas (UNICEF, 2024).
- Environmental Concerns: Rapid industrialization and urbanization have led to environmental degradation, threatening the country’s long-term sustainable growth (UNEP, 2024).
The Way Forward: Addressing Key Issues
To sustain and enhance its economic growth, India must address several critical challenges:
- Skilling Programs: There is a need to expand programs aimed at upskilling the workforce, especially in emerging technologies like AI, to address unemployment and underemployment (AI for India, 2024).
- Reducing Income Inequality: India must implement policies to ensure that economic growth benefits all sections of society, reducing wealth inequality (Oxfam, 2023).
- Educational Reforms: Strengthening the education system with a focus on quality, accessibility, and alignment with market needs, especially in tech-related fields, is essential for future growth (UNICEF, 2024).
- Climate-Resilient Policies: India needs to prioritize sustainable industrialization and urban development policies to mitigate environmental risks and ensure long-term growth (UNEP, 2024).
Important Points:
Key Drivers of India’s Economic Growth:
- GDP Growth: India’s GDP is projected to grow at 7% in FY 2024-25, making it the fastest-growing major economy (World Bank, 2023).
- Digital Transformation: UPI transactions surged from 92 crore in FY 2017-18 to 13,116 crore in FY 2023-24, highlighting rapid digital adoption (Digital India, 2024).
- Startup Ecosystem: India has 151,000 recognized startups and saw a 15x increase in investments from 2015-2022 (Startup India, 2023).
- Financial Inclusion: Over 53 crore bank accounts were opened under PMJDY, bringing millions into the formal financial system (Government of India, 2024).
India vs. China: Economic Comparison:
- GDP Growth (2024-25): India’s GDP is expected to grow at 7%, while China’s is projected at 4.8% (World Bank, 2023).
- Stock Market Performance: India’s stock markets grew at a 15% CAGR, whereas Chinese markets showed near-zero or negative growth (SEBI, 2024).
- Digital Finance: India’s UPI system is experiencing rapid growth, while China’s digital payments are advancing but at a slower pace.
- Startup Ecosystem: India is the third-largest global startup hub with 151,000 startups, whereas China’s startup sector is facing regulatory challenges.
- Demographics: India benefits from a younger population, while China faces economic challenges due to an aging population (UN, 2024).
Challenges Faced by India:
- Infrastructure Gaps: Significant infrastructure deficiencies, particularly in rural areas, hinder productivity (World Bank, 2023).
- Unemployment: High unemployment and underemployment, especially in the formal sector, need to be addressed (ILO, 2023).
- Income Inequality: Economic growth has not been evenly distributed, with large portions of the population excluded from its benefits (Oxfam, 2023).
- Educational Gaps: Gaps in quality and access to education, especially in rural areas, need attention (UNICEF, 2024).
- Environmental Concerns: Industrialization and urbanization are leading to environmental degradation (UNEP, 2024).
The Way Forward:
- Skilling Programs: Expand initiatives to upskill the workforce, particularly in emerging technologies like AI (AI for India, 2024).
- Inclusive Growth Policies: Focus on policies that promote equitable wealth distribution and reduce income inequality (Oxfam, 2023).
- Educational Reforms: Strengthen the education system to improve quality, accessibility, and alignment with market demands (UNICEF, 2024).
- Sustainable Development: Prioritize climate-resilient policies to mitigate environmental risks and support sustainable growth (UNEP, 2024).
Why In News
At the Annual India Leadership Summit in New Delhi, discussions centered on India’s rising economic influence, especially in comparison to China’s long-standing dominance in the region. With a projected 7% GDP growth and over 151,000 startups, India’s economic reforms, technological innovations, and digital transformations are propelling its rapid ascent. These developments are positioning India as a key player in the global economy, poised to shape the future of both regional and international markets.
MCQs about India’s Rising Economic Influence
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What initiative led to a significant increase in UPI transactions in India?
A. Make in India
B. Digital India
C. Startup India
D. Skill India
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How many recognized startups does India have, according to the Startup India report?
A. 100,000
B. 125,000
C. 151,000
D. 175,000
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What is one of the key challenges India faces despite its economic growth?
A. High GDP growth
B. Infrastructure deficiency
C. Over-employment
D. Excessive foreign investments
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