In these unprecedented times, when the common citizens are adapting to the new normal and life is returning to normalcy, the eyes of the entire nation will be stuck at the national television and channels on February 1, 2021, when the union finance minister Nirmala Sitharaman will be presenting the Union Budget for the upcoming financial year 2021-22. This will be the first time ever since the release of independent India’s first budget on November 26, 1947 that the government has decided not to print the Budget documents following the protocols of COVID-19. Hence all the MPs will be receiving soft copies of the Budget and Economic Survey of FY 2021-22. 

Speaking about Union Budget 2021-22 set to be presented in the Parliament on February 1, 2020, FM Sitharaman said-

“100 years of India wouldn’t have seen a Budget being made post-pandemic like this”

The Union Budget 2021-22 will make it quite imperative for the government to come up with a comprehensive strategy for the revival of the Indian economy against the backdrop of an economic contraction of 7.7% (Mint, 2021). Therefore all the stakeholders hold great expectations from the release of the budget hoping that it provides a boost to the economic growth. While the investments in social sectors like health, education, medical infrastructure, Research and Development (R&D), inculcating better skills to manage the use of technology in medicine is going to be important, challenges in the livelihood pattern ought to be seen in a broader canvas with the changed perspective on skill development. 

Tax and FDI reforms: Impetus to the insurance industry

During the past several years, there has been a tendency of low insurance penetration in health insurance that has acted as a cause of worry for the common citizens. Following the shortage of healthcare insurance funds in the light of  COVID-19, it becomes imperative for the industry experts to believe that the Union Budget 2021 should be leveraged in such a way to mitigate the distress of individuals and industry to some extent. 

It is being speculated that the reforms in two key spheres- tax and foreign direct investment (FDI) can be undertaken and discussed at length under the Union Budget 2021. The provisions should be made for enhancing the limits of insurance under section 80C and 80D that will encourage consumers to opt for health life insurance (Mint, 2021).  

Further, the GST payable currently on the insurance premiums must be reduced by the government thus making life insurance affordable to the vulnerable sections of the society. Such tax reductions and incentives will prove to be successful in the long run by ensuring insurance penetration in India. 

Liberalisation in the FDI regime is extremely important in order to attract additional capital to expand the business in the economy and ensure substantial insurance penetration into India. Therefore, there is a growing need that the government should liberalise the current FDI regime by raising the FDI limits to 74% from the current limit of 49% of paid-up equity capital (Mint, 2021). This would in turn support the disinvestment programme of the government. The reduction in the FDI limits will prove to be an impetus to the expanding insurance industry of India thereby providing opportunities to the investors to fetch higher returns on the assets and capital. 

Another important recommendation has to be made in the form of treating annuity income as tax-free income which will encourage higher uptake of annuity policies and better financial security during the old age years.  This recommendation is significant for a country like India, which has a history of limited social security measures. 

Work from home: A time to rethink the income tax allowances 

The global outbreak of the novel COVID-19 in the month of March has drastically changed the working landscape for the organisations globally. This shift in the working landscape has put in several companies to provide enabling infrastructure such as furniture (like tables, chairs etc), printers, high-speed internet connectivity, stationery etc for providing ease to the employees working at their residences. 

For the smooth conduct of the work at their respective places, the organisations are providing a fixed allowance to the employees in order to meet the expenditure incurred on furniture and digital infrastructure. The governments have to work in tandem with these organizations and ensure the efficient provision of exemption and deductions for the allowances which are reimbursed by the employer to employees who are working from their respective homes. The Union Budget 2021 should also incorporate a similar approach as well thus reaping the benefits of evolving a new digital working landscape. 

The Education sector: Seeking an array of Expectations

With just a fortnight left for the release of Union Budget 2021-22 by the Ministry of Finance, the experts are in lieu of several expectations in the education sector from the Union finance minister Nirmala Sitharaman. Here is the discussion on the top five expectations for the education sector in Budget 2021 (Economic Times, 2021). 

Use of Technology in Education

Following the outbreak of COVID-19, there was an increasing use of technology in education as the schools and academic institutions were shut down. The Finance minister should provide some relief to the education sector in terms of reduction in GST and subsidy on the education loans which are granted for both formal as well as skill-based learning. The focus should also be on the provision of the appropriate flow of ed tech-focused funds into the education sector that will enable the mid-size tech start-ups inside the campuses in raising the money for better and faster experiences using technology in education. 

Online teaching

In order to make online education accessible to each and every student, the GST on online education should be cut down to 5% from 18% in the upcoming Budget 2021 (Economic Times, 2021). The experts are looking at the more announcements especially in reference to New Education Policy 2020 with a primary focus on the K12 segment. The collaborative approach should be adopted wherein the government and private institutions can come forward in order to scale up the coding education. Thus increasing the contribution of education in the lives of students across the nation. 

National Education Policy 2020

The NEP 2020 marked the historic turn of events in the education sector. The vision laid by the government in the form of mandates in NEP 2020 will play a significant role in achieving the inclusive education system. There has to be a concrete implementation plan for the NEP 2020 in the Union Budget 2021 to further ensure focussed investment in Edu-tech companies. 

Tax Exemption

In the Union Budget 2021, the central government must ensure to reduce the expenditure limit of 85% to obtain tax exemption of 75% (Economic Times, 2021). Further, the academic institutions having good NAAC score should be allowed to retain the additional 10% of the funds received by them for providing education loans to the students. Such a provision will prove to be successful in providing funds to students that cannot provide collaterals to obtain loans in the long run. 

Restoring the trust of India’s upset farmers

With the farmers’ agitation still in place, the Union Budget 2021-22 will have to address the problems in agriculture with a more comprehensive and practical approach. The promise of doubling farmers income by 2022 made by the then finance minister Nirmala Sitharaman in her last year budget would require annual growth of 15% in the real income of the farmers till 2022. The Union Budget 2021-22 will therefore have an action to increase the allocation of Central government to schemes like on irrigation, rural roads, warehousing and storage facilities. Moreover, the new Acts are likely to supplement the working of mandis and will not replace them. The Minimum Support Price (MSP) will continue with no substantial changes. This will reorient the expenditure of the government in the right direction to restore the lost trust of farmers. 

Weaving a way for healthcare innovations

While the country is still struggling to deal with the pandemic, the state of health infrastructure in some of the developed economies has raised an alarm across the globe. This pandemic has reflected on the structure of the healthcare sector in India. Keeping  in view the last year allocation of Rs 69,000 crore to the healthcare budget, some of the key considerations for the Union Budget 2021-22 are listed below:

1. The centrally funded hospital and medical college have to be established in each Indian district. This will change the landscape of healthcare in India by ensuring effective and quality healthcare facilities to citizens.
2. The National Healthcare Audit Authority (NHAA) should be set up and funded which will provide the facility of audit functioning of all the healthcare institutions in the country.
3. The Ayushman Bharat Yojana, also known as the Pradhan Mantri Jan Arogya Yojana (PMJAY) should be expanded to include all the taxpayers. 

The gap in the accessibility and affordability in healthcare facilities is enabling local technology-driven innovations that will facilitate the delivery of medical devices within the country. This gap and provision need to be addressed in Budget 2021 with a special focus on the equitable allocation of the funds for healthcare delivery, healthcare equipment, healthcare infrastructure and healthcare innovations by means of start-ups. 

Hospitality sector: Looking for a fair deal in Budget 2021

The travel and tourism sector is the worst-hit sector due to COVID-19 pandemic. The structural financial reforms are needed to ensure the pathbreaking recovery of the sector in the upcoming Union Budget 2021. The experts of the sector are in the view of revitalising the famous Incredible India campaign in accordance with the year 2023 when India will be hosting the G20 summit. The current GST structure of wellness and medical tourism should be restructured so that there is an infusion of funds into the tourism businesses. 

The Federation of Association in Indian Tourism and Hospitality (FAITH) has proposed the setting up of a National Council of Chief Ministers to be headed by the Prime Minister as well as the Tourism Minister. This Council should be placed in the concurrent list and be a subject matter of both Central and State government. Further, the incidence of taxes on tourism earnings should be cut down to zero per cent. The current Service Exports from India Scheme (SEIS) of 10% to all the foreign exchange earnings in tourism be made in place for the next 5 years in order to ensure the post-covid recovery (Sinha, 2021). 

The country holds immense potential for promoting domestic tourism. The Indian organisations and business houses should be encouraged to promote domestic MICE (meetings, incentives, conferences and events) by offering them 200% income tax expense benefits to those Indian organisations who are a part of domestic MICE in India. For conserving the rich cultural heritage of our country, there is a need to establish a Natural and Cultural Heritage Restoration Fund with a backup of at least Rs 2000 crore that will encourage sustainable tourism around each horizon of tourism. 

A secured comprehensive mechanism is required to secure the future travel plans for the travel agents and tour operators who are affected by the pandemic thus restoring the higher growth in the travel and tourism sector. 

Privatisation of Public Sector Banks and PSUs

While the previous year’s budget(2020-2021) made way for the bank-led growth, banks are facing the challenge of confounding the impact of COVID-19 pandemic on their balance sheets and focussing on the economic recovery of India. It is expected that the upcoming Union Budget will include the proposal for Bank Investment Company (BIC) which will increase the shareholding of the government in its banks. As a result of which Public sector banks (PSBs) will dominate the banking sector as the major responsibility will fall on them. 

The government which is running a high fiscal deficit is in search of alternatives in order to reduce its burden on the Non-Performing Assets (NPAs). it is projected that the gross NPAs will be rising to 16.2% in the first quarter of FY21. the mounting NPAs has to be reduced. The BIC is therefore seen as a first welcoming step signalling the intention of the government to undertake reforms in order to ensure that the performance of PSBs are improved. The upcoming budget could therefore act as a signal by announcing the first step- the re-emergence of the Bank Nationalisation Acts and the State Bank of India Act.

Fiscal deficit targeted at 4% of GDP by FY26

It is expected that the Central government will provide an outline and lay down a road map in the Union Budget 2021 to bring the fiscal deficit down to 4% of GDP by FY 2025-26. This plays an important role in considering the fact that there will be growing demands for expansionary policies for the next 4-5 years. This further means that the government had to deviate from the set medium-term target of around 2-3% of GDP as the recommendations made by the Fiscal Responsibility and Budget Management Act (FRBM).

An opportunity to fund data infrastructure and Artificial Intelligence skills 

India has a golden opportunity to lead the next Industrial Revolution which is dominated by Big Data and Artificial Intelligence. The upcoming Union Budget 2021-22 will act as a platform for the Union Finance Minister Nirmala Sitharaman to unfold the benefits of big data through employment multiplier by means of funding through data science which is subjected to research (Umapathy & Singh, 2021). The integrated pool of the entire national data will be the way forward. The data generators ought to share the unfiltered data with the pool. This step will boost employment, nurture the start-up ecosystem and generate employment in the economy.  

Inclusion of Climate-responsive budgeting: A way forward

There is a growing need to recognise the potential of India is working towards a national budget responsive to climate change. Several initiatives have been taken by the leaders worldwide after recognising the significance of efficient fiscal handling of the climate changes in the spheres of planning of domestic public finances. For example, the Paris government has launched the Paris Collaborative on Green Budgeting. In south-east Asia, Indonesia has successfully implemented its climate budget tagging framework in 2016 and leveraged it in 2018. 

The state of Odisha in India which is the most disaster-prone state with the highest disaster score in the country has launched its own climate-budgeting based on the experiences of budget lines across the key economic sectors. Gujarat is another Indian state which has worked at length to adopt its own annual climate budgeting framework. However, India lacks such uniformity in the process of integrating all the subnational climate actions with the national climate goals. The state governments need the leadership of the Centre in establishing guidelines for climate-budgeting at the national level and work on climate-related risk planning. 

Climate-responsive budgeting will make sure that the future governments in power are financially stable in order to ensure the smooth transition of the economy. Moreover, India has to be ready to act as a responsible host during its maiden G20 presidency on climate change and economy. 

Personally, I believe the upcoming Union Budget 2021 will play a crucial role in lifting the Indian economy out of the recession and take significant steps that will focus on post-Covid recovery. Additionally, it is extremely important to concentrate on the forthcoming vision of the upcoming budgets on the threats imposed by climate change. For this, a proper national framework will be required focussing on the contribution of stakeholders from a diverse background including civil society and think tanks. 

Bibliography

Economic Times. (2021, January 17). Budget 2021: Expectations of Education Sector. Economic Times. https://indianexpress.com/article/opinion/columns/union-budget-2021-psb-privatisation-7148097/

Maji, P. (2021, January 15). Budget 2021 expectations. Financial Express. https://www.financialexpress.com/money/budget-2021-expectations-tax-fdi-reforms-to-provide-much-needed-impetus-to-insurance-industry/2171583/

Mint. (2021, January 16). FM holds pre budget meetings with the key stakeholders. mint. https://www.livemint.com/budget/expectations/page-2

Pandey, R., & Priyadarshini, D. (2021, January 16). Budget must take steps towards privatising ownership of public sector banks. The Indian Express. https://indianexpress.com/article/opinion/columns/union-budget-2021-psb-privatisation-7148097/

Sinha, D. (2021, January 18). Budget 2021 Expectations: Travel, Tourism sector expects pathbreaking Union Budget for post-Covid recovery. Financial Express. https://www.financialexpress.com/budget/budget-2021-expectations-travel-tourism-sector-expects-pathbreaking-union-budget-for-post-covid-recovery/2173235/

Umapathy, S., & Singh, R. (2021, January 19). View: Budget 2021 should fund data infrastructure and Artificial Intelligence skills. Economic Times. https://economictimes.indiatimes.com/tech/technology/view-budget-2021-should-fund-data-infrastructure-and-artificial-intelligence-skills/articleshow/80317424.cms

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Statistics and Figures

It is estimated that there was a steep decline of 23.9 per cent in the Gross Domestic Product (GDP) in the months of April to June 2020, which coincides with the impositions of lockdowns. This figure also becomes significantly grimmer when we compare it to last year’s GDP growth of 5.2 per cent in the same quarter. Similarly, there were other sectors which saw a decline in the Gross Value Added (GVA) of April to June 2020 compared to growth in April to June 2019. Electricity, gas, water supply and other utility services shrank by 7 per cent, whereas they had seen an 8.8 per cent growth a year ago. There was a decline of 10.3 per cent in public administration, defence and other services. These services had seen a growth of 7.7 per cent last year.

But perhaps one of the most shocking figures comes from one of the worst-hit industries – trade, hotel, transport, communication and services related to broadcasting. They witnessed a decline of 47 per cent in the first quarter, compared to an earlier growth of 3.5 per cent. The only positive growth was witnessed in agriculture, wherein the GVA grew at a 3.4 per cent rate compared to last year’s 3 per cent in the same quarter. 

What do these numbers mean?

These numbers tell us that the lockdown brought with it impacts that were not just short term. Driving down GDP to such an extent means that it will take more time to bring it back up. There have been several such long-term impacts – the lockdown caused disruptions in critical supply chains. With limited incomes, the demand for consumer goods fell. The savings of businesspeople sitting at home continued to dwindle. There was widespread unemployment. While people were stranded due to hastily imposed lockdowns, they continued to barely survive and use their earnings on basic necessities. The impact of the lockdown was a significant dent in the growth of the Indian economy.

But in this era of international trade and globalisation, the impact in India cannot be featured in an isolated discussion. The impact on the world economy also negatively impacted the Indian economy. Arun Singh, who is the chief economist at Dun and Bradstreet India said, “A fall in the optimism levels amid heightened uncertainty has led to a ‘double whammy’ – closure of businesses leading to global supply chain disruptions and a steep fall in the consumption.” Until the rest of India’s trading partners and the world economy as a whole doesn’t find its footing, a complete recovery can prove to be difficult.

Why has there been such a huge impact in India?

While all countries witnessed some sort of economic decline, some countries were comparatively quicker to get back up on their feet. For example, the Chinese economy saw a growth of 3.2 per cent in the months of April to June 2020. This was preceded by a decline of 6.8 per cent in January to March 2020. However, India hasn’t been as lucky in its economic recovery. There are several reasons for this, the first being the length and intensity of lockdowns. India had a countrywide lockdown for several weeks and in some regions of the country, it went on for several months. But more importantly, economic recovery goes hand in hand with the number of cases a country has. The sooner a country can drive down the number of infections, the earlier they can go back to reopening their economies. Lesser infections will inevitably mean less spending on healthcare and fewer people out of the workforce. Reopening the economy will not have as much of a positive impact if workers are isolating at home due to sickness. 

The “New Normal” and the Future of the Economy

It is a given that in order to get the economy back, the debate between healthcare and economic recovery needs to be interpreted in a much more multi-nuanced way. Both of these aspects need to go hand in hand. To reap economic benefits, the health of the citizens needs to be taken into account. Efforts in these sectors are being made and these efforts are also proving to be fruitful.

The “New Normal” of the Indian economy will perhaps ironically be the most abnormal of situations our economy has been in – one that is ruled by the stock market and rates like always but also greatly influenced by a disease and the healthcare systems of the country. The new normal will be painted by uncertainty and more fluctuations than usual. Moreover, national recovery will have to be followed by a global recovery as well.

Conclusion

The recovery in India has recently started to look up with reports of economic activity slated to see positive growth of 0.5 per cent in January to March 2021. However, this is dependent on the absence of a second wave in the near future. This further goes to prove the importance of keeping health in mind while pursuing economic recovery. Like almost everything that is related to the pandemic, economic recovery’s solution also includes keeping public health guidelines in place. From encouraging workers to wear masks to making people work from home, the pandemic has completed transformed the scene of economic activity in India and all over the globe and not just ushered in a new normal of the Indian Economy but for every aspect of our life.

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Current Economic Inequality

While economic growth has certainly been witnessed in the region, the growth has been worryingly unequal. Recently, with the growth of digitalisation and improvements in technology, while productivity has increased, there has been a trend to favour capital over labour. This has contributed to income equality, which is exacerbated by another trend of favouring skilled labour over unskilled labour. Most ASEAN countries are currently stuck in a middle-income trap. 

The data from ASEAN countries is surprising – they all score highly on the Gini Index, which is used to measure economic inequality. Among all ASEAN countries, Thailand scores the worst. According to the Bank of Thailand’s research institute – the Puey Ungphakorn Institute for Economic Research – Thailand’s 36 per cent of corporate equity is held by just 500 people, while they have a population of about 69,625,582 people. The average yearly household income of these people is around US$10,000. But in stark contrast to this meagre amount, the aforementioned 500 reap around 3.1 billion baht (US$102 million) per year in company profits. 

Economic Inequality and Political Instability

Economic inequality can lead to political turmoil and therefore threaten the peace and security of the region. Unmet expectations can lead to a lead to a dissatisfied voters’ base. Such a voters’ base is likely to vote for populist governments or cause civil unrest. Rattana Lao, lead author of a study by the Asia Foundation called Thailand’s Inequality: Myths and Reality of Isan said that “Research has shown that one of the leading indicators that pushed people toward political turmoil and protest is the fact that they are not satisfied with their economic condition and the uneven treatment that they receive.”

A crucial realisation that fails to be accounted for in most discussions surrounding economic inequality is that regional disparities also constitute as a worry. Specifically, when talking about political instability, people from poorer regions rely more on government supports and can have unrealistic expectations from their governments. These people are more likely to be engaged in politics and hence can determine voting outcomes. The dissatisfaction of electors can turn into a series of protests, as witnessed in the case of the Arab Spring. 

Thomas I. Parks, the Country Representative for Thailand at The Asia Foundation writes in regard to the aforementioned report, “The challenge now for Thai leaders is to find the best mix of programs and policies and stick to them. In the coming years, the government must carefully monitor and evaluate the results of its policies and programs, and the lessons learned, and then make adjustments whenever needed.” Regional disparities and the level of income inequality has to dictate policies if governments want to avoid civil unrest. 

Economic Inequality and Hindrance to Trade

Unfortunately, income inequality goes beyond political instability. Persistent-income inequality can significantly impede growth and weaken demand, therefore affecting trade and ASEAN’s goal of economic integration. Believers of trickle-down economics are proven wrong if we look at the experience of ASEAN countries. According to the International Monetary Fund, if the income share of the top 20 per cent increases by 1 per cent, we witness an associated 0.08 percentage point decrease in Gross Domestic Product (GDP) growth in the next 5 years.

There is a clear correlation between economic equality and sustainable economic growth. Policy measures need to strive for equal access to resources and opportunities, otherwise, we may witness some sort of economic growth, but it will only be limited and unsustainable. Economic development, which is what countries should strive for, includes sustainable growth – and it is only possible when there is an overall economic upliftment of everyone in society.

Moreover, ASEAN’s goal of promoting trade in the region is affected when we look at the driving factors of income inequality. Factors that have been identified as contributors include globalisation and warped fiscal policies of governments. For example, Multinational Companies (MNCs) do not pay proper taxes which helps them retain profits but also indirectly takes away crucial funding from government schemes, and therefore this help never reaches the poor. Organisation for Economic Co-operation and Development’s Chief Economist, Laurence Boone said: “At the global level, we must ensure that firms pay their fair share of taxes to create value and employ people.” On the one hand, it is impossible to reject globalisation due to the adverse damage it would do to trade, but on the other hand, it is crucial to make sure the benefits of globalisation are reaped by everyone. Similarly, fiscal policies of countries cannot seek to just remove income inequality – they need to be in line with ASEAN’s policies of economic integration (and therefore, globalisation). In these aspects, ASEAN needs to make sure that it’s member countries remain in tune with its agenda, while at the same time make sure that income inequality is eradicated. 

Conclusion

Both the main objectives of ASEAN are put in jeopardy with the context on economic inequality. In fact, having one objective threatened also affects the other – for example, political instability also disincentivizes people to invest and drives down economic growth. Similarly, slow trade and economic growth leads to resentment amongst the people, and therefore political instability. Ultimately a dangerous cycle can form.

Political instability reduces the likelihood of proper collaboration on an effective economic agenda and trade policies. Frequent regime changes and different leaders might essentially make ASEAN’s goal of proper and effective economic integration difficult to achieve. This, in turn, will lead to poor economic policies, followed by low and unsustainable growth fuelling economic inequality. Economic inequality and hindered trade by creating dissatisfaction amongst citizens will again lead to continued political instability and fragmentation.

In order to make sure that officials’ capacity to implement proper trade policies is not undermined, it becomes crucial to recognise the real-life impact of income inequality and understand the disastrous affects it can have on just numbers and figures of growth, but in lifting people’s social class and living standard. ASEAN’s objective of a better region is threatened by the security risks that economic inequality poses. For example, the recent coronavirus pandemic also disproportionately will affect the poor. In situations such as these, economic equality and consequently equitable access to resources (healthcare, information, a steady source of income etc.) becomes a priority. Poverty and economic gaps don’t just make it tougher for people on the lower end to recover, it also makes every situation tougher for a nation to escape from, and therefore also makes it tougher for a regional entity such as ASEAN. 

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We’ve heard the word superpower in different contexts over media and academia, the word, superpower for most children across the world would mean an exceptional or extraordinary power or ability, mostly in the form of superman or superwoman, a fictional character that possesses the power to make a significant impact on the world, while keeping the very crux of the word alive, we will talk about a very specific nation, India, and its journey to be a superpower. However, we need to go back to the century that went by to understand how the idea of a superpower came about. 

The rise and fall of two superpowers 

Until the 20^th century, the world knew only two superpowers, USA and the Soviet Union, the landmark emergence of two world superpowers stems from the end of  World War II marked by the bombings on Hiroshima and Nagasaki by the USA, critics over the world suggest that the US knew that Japan was about to surrender and that it was Unnecessary to bomb the two Japanese ports. However, the USA went ahead with its decision to stop the Soviet Union from making any military and political gains in Asia and prove that America is supreme. The end of World War II led to every newly decolonised country had two options in front of it, either be friends with the US or Soviet Union. At this time, countries in Asia and Africa had got independence and most of these countries wanted to claim their sovereignty and didn’t wish to side with either of two power blocks. One would say it was the emergence of Non-aligned movement (NAM) as India’s bid to stay non aligned that can be seen as a sign of non-adherence to power systems.

India’s economic policy from 1951-1991

India’s economy at the dawn of independence was in distress. For over 200 years, India served the purpose for the good of the United Kingdom, the good that was bought on the ruins of India’s economic tradition. Post-independence, one of the major questions in the mind of policymakers was if India’s growth should be agriculture or industry-led and we went ahead with industry-led growth primarily because there was almost no presence of infrastructure sector, i.e, power, transportation and communication, there was the negligible presence of the infrastructure industries like iron and steel, cement, coal, crude oil, oil refining and electricity, lack of skilled manpower, absence of a market of industrial goods.

However, the obvious choice for India would have been to go for the agricultural sector as the prime moving force because India had natural resources from Rajasthan in the west to Odisha in the east and the fertile plains to feed the country. By organising our land ownership, irrigation and other inputs of agriculture, India could have gone for better prospects of development, once we as a nation would have achieved self-sufficiency in food grains, food security, national healthcare infrastructure, a shelter for all and universal education we could’ve realised one of biggest goals in human development. The most prosperous countries in the world today are not the most industrial in their approach towards development, they mostly have an all-round approach to human development that focuses on improving the standard of living of its citizens by ensuring excellent health care system and education.

However, learning from these prosperous Scandinavian countries we must plan our future course of action. In 1991, the government in power under late prime minister P.V  Narasimha Rao led LPG reforms right after the Current account deficit wherein India was only three weeks away from welshing on its external balance of payment obligations. International Monetary fund asked India to go for the reforms in exchange for an emergency loan of 2.2 billion dollars. Reforms formally began on 1^st July 1991 when RBI devaluated Indian rupee by 9% and by a further 11% on 3^rd July. The economic policy reforms yielded good results, dramatically improving the quality of life in India and a new boast to the banking industry. However, like every action has equal and opposite reaction, trade liberalisation corresponded with a dramatic rise in inequality and associated social issues. The Indian GDP rose from $266 billion in 1991(inflation-adjusted) to $3 trillion in 2019 (1100% increase) while its purchasing power parity rose from $1 trillion in 1991 to $12 trillion in 2019. Now let’s move ahead and understand the challenges ahead of India in becoming a superpower. 

India’s strengths in achieving its goals

India’s demographic dividend 

India’s biggest strength lies in its demographic dividend. India is the youngest country in the world with 2/3^rd of its population in the working-age group, the young blood in India should be channelised to achieve the goals India has set for herself. However, this aim can only be realised if our educational, manufacturing and service sectors are given a boost along with a steady medical infrastructure

The abundance of natural resources

Among India’s many other strength lies, its abundant natural resources and varied topography. Our land is endowed with a range of topographies ranging from the Himalayas in the north to the northern fertile plains, from the coal mines in Jharkhand and Odisha to gold mines in Karnataka and copper mines in Rajasthan. The fact that we’ve such a wide variety of natural resources puts us in a strong position to utilise our resources effectively while depending less on imports from our neighbours. The recent strides made by India in utilising solar, wind, thermal energy will only bring in long term dividends to India’s energy sector while cutting down our imports.

An ever-growing service sector

 One of the major advantages for India lies in its service sector. The service sector accounts for 53.66% of India’s Gross value-added product (GVA) while the industrial sector is at the second spot and contributing around 31% of the Indian GDP, this means that both service and industrial sector are contributing to the Indian GDP effectively. The only matter of concern here is, even though both service and industrial sector are the highest contributors to the GDP, the maximum number of people are still in the agriculture and fishery sector.

Strides in ease of doing business

India has continuously improved her position in the ease of doing business report published by the World bank year after year. The report measures the performance of countries across 10 different dimensions ranging from how easy or difficult it is to start a business, get access to construction permits, resolving insolvency, electricity availability, credit availability among others. India maintains its 1^st position among South Asian economies which was 6^th in the year 2014. Our performance in ease of doing business has created enough room for foreign investment in the country that will ultimately employ the youth, nurture their skill set and increase saving which will ultimately lead to economic growth. 

A growing economy

 At present, the Indian economy is passing through a rough time but it is expected to recover soon. As per the latest report of ‘World economic league table 2020; India has overtaken both France and the UK to become the world’s 5^th largest economy in 2019. Well, that certainly is some good news. Isn’t it?

India’s weaknesses

Inadequate health and education infrastructure 

Every country has its set of problems and so does India. Our problems are varied, the most important being inadequate health and educational infrastructure. Our health and education spending is hardly 3% of our GDP, i.e one of the lowest in the world. It is indeed alarming that a country of almost 3 billion people are not given appropriate health and educational infrastructure and has aspirations of being a superpower. In most modern democracies, health and education fall under the wider umbrella of duties of the state and it is indeed the responsibility of the state to make sure that an appropriate share of GDP is allocated on the two primary pillars of human development. 

Red-Tapism

Bureaucracy in India has long been plagued with Red-Tape. Excessive regulation and paperwork in every department and delay in the processing of documentation to achieve the desired goal makes it an uphill task for a common man to get the work done in Indian offices, corporations and other large organisations. The foremost solution to decrease red tape is by bridging the digital divide between the have and have nots and along the process digitalise most government offices and grievance redressal mechanisms for the benefit of the citizens at large. 

High interest rate 

The central bank is infamous for asking Indian banks to charge high-interest rates from its customers especially when inflation is predicted to rise more than the target. However, even when inflation rates are rather in control we often see Indians under the gloomy cloud of high-interest rates, with the high interest rate, the payment of interest rate and loans become ever more expensive, this in return discourages people from borrowing and further spending. Those who have taken loans will have less disposable income at their end that will ultimately lead to less consumption. 

A growing divide between the rich and the poor

The Indian economy is among one of the largest in the world. Its free-market principles post-1990 has brought significant dividends for the economy but at the same time, wealth distribution has been highly unequal. It is alarming how the richest 1% of Indian’s own 58.4% of the wealth. With the trend only going upwards every year. The irony of the situation is that even to this day, 22% of Indians are below the poverty line. What is particularly worrisome in India’s case is that economic inequality is often being added to a society that is already divided into the lines of caste, religion and gender. Income inequality when analysed and understood in terms of caste, religious and gender lines bring to us a blurry picture of shattered dreams and dual reality. This dual reality is of an India that is indeed an emerging superpower but at the same time, 22% of her population still does not know where its next meal will come from.

What needs to be done

We’ve made significant strides in the years gone by and it won’t be an understatement to give ourselves a pat on the back, but it’s time we accept the challenges ahead of us and strategise our plan of action accordingly. For starters, India needs to focus on strengthening health and education infrastructure, the healthier and educated our young ones are, the easier it is to achieve the goal of holistic development. Along with boosting our infrastructure, we must realise the principle of sustainable development. Since last 30 years world has been ever more conscious about preserving the environment, even though India has been given certain advantages because it’s a developing country, we should not undermine the importance of developing our infrastructure and our way of life on the lines of environmental ethics. 

Analysis 

It’s been over 70 years since India achieved its independence, it was a hard battle but we won it our independence by our very conviction in self-reliance and will to hold the baton of self-rule in our very hands. What India needs to do now is work towards achieving economic growth that has its roots in human development at large. We have indeed come far, but there’s still a long way to go. Being a superpower is not merely about a number or a spot on the world map, it is battle to become a better nation for ourselves and for those who dreamt of a nation that was united in its spirit, ever-growing, ever-flourishing, in letter and spirit.

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