fbpx Skip to content

To Grow at 7.5 per cent or Not: Addressing Structural Deficiencies for Sustainable Economic Growth


In the pursuit of sustainable economic growth, attention to structural deficiencies and the implementation of appropriate measures are paramount. The Reserve Bank of India (RBI), like many other central banks, has recognized the significance of sustainable growth and its alignment with price stability. In a world characterized by slow economic growth, India is facing its own challenges. The recent RBI Bulletin (July 2023) on the State of the Economy acknowledges the global slowdown’s impact and highlights some concerning trends within the Indian economy.

Global and Indian Economic Landscape

The world economy is witnessing a slowdown, particularly in manufacturing and investment, compounded by the re-engineering of supply chains due to industrial and trade policies. In such times, it becomes crucial for central banks and governments to work in harmony to chart a course for economic growth. The Bulletin recognizes India’s progress in various sectors, such as infrastructure, digitalization, and solar capacity, but also points out sequential moderation in economic activity, high unemployment, declining manufacturing exports, and rising inflation.

Deciphering India’s Growth Trajectory

Understanding India’s growth trajectory requires analyzing its historical performance. The period from 2004 to 2014 saw robust growth rates, with the GDP growing at an average of 8.5 per cent per year. However, in the nine-year period from 2014 to 2023, the average growth rate plummeted to 5.7 per cent. This decline raises questions about the factors driving growth and highlights the need for structural reforms.

Neglected Fundamental Weaknesses

Several fundamental weaknesses in the Indian economy have been neglected, which hinder its growth potential. These include:

1. Low Labour Participation Rate and High Unemployment

India’s working-age population represents a significant demographic advantage, often referred to as the “demographic dividend.” However, the Labour Participation Rate (LPR) has been alarmingly low, with the overall rate falling below 40 per cent and female LPR even worse at 32.8 per cent. The staggering unemployment rate further exacerbates the issue, leaving a substantial portion of the population’s human resources untapped.

2. Quality of Education

The Annual Status of Education Report (ASER) has revealed concerning learning outcomes among children in rural India. Subpar levels of numeracy, literacy, and English skills raise doubts about preparing the workforce for the demands of a modern economy. Improving the quality of education is essential for nurturing a skilled and capable workforce.

Source: Indian Express

3. Low Productivity in Agriculture

India’s agricultural productivity, particularly in rice and wheat production, lags behind that of countries like China. With factors such as climate change, urbanization, and rising input costs, it is crucial to boost productivity in the agricultural sector to sustain its profitability.

4. Inflation and Interest Rates

High inflation, elevated interest rates, and tariffs pose significant challenges to Indian industries. Addressing these issues requires decisive action to foster a conducive business environment.

Addressing the Challenges

To achieve sustained economic growth of 7.5+ per cent, India must take decisive steps to address its structural deficiencies. This can be achieved through:

  • Focused Labour Market Reforms: Encouraging greater participation in the labor force and reducing unemployment through targeted policies and investments in skill development.
  • Revamping Education System: Prioritizing education reforms to enhance the quality of learning, promote technological literacy, and equip the workforce for future challenges.
  • Agricultural Reforms: Implementing agricultural practices that promote sustainability, increase productivity, and ensure the livelihood of farmers.
  • Tackling Inflation and Interest Rates: Instituting measures to curb inflation, minimize risk perceptions, and create an investor-friendly environment.


As India strives for economic growth, it must not lose sight of the structural deficiencies that hinder its progress. Embracing sustainable economic policies, investing in education and skill development, and revitalizing the agricultural sector are essential steps towards achieving the desired growth rate. By addressing these fundamental weaknesses, India can unlock its full potential and become a true global economic powerhouse

More Link
What's New

Copyright © 2023 UPSC Padhai. All Rights Reserved.