Mains Practice Questions

Approach:

• Introduce India’s economic growth and the challenge of ensuring equitable development across all sections of society.
• Explain structural issues such as poverty, unemployment, regional disparities, and income inequality, and suggest corrective measures.
• Conclude suitably

Introduction:

Despite India’s rise as the world’s 4th economy, its economic growth is struggling to translate into broad-based employment generation and equitable income distribution. This disparity raises critical concerns about the structural inefficiencies within the Indian economy. Factors such as wealth concentration, informal labour markets, and social exclusion continue to limit the reach of growth, making it uneven and exclusionary.

Body:

Structural Issues Contributing to Disparity:

• Informal Sector Dominance: Over 90% of India’s workforce is employed in the informal sector, which lacks job security, social benefits, and fair wages. This sector is not adequately regulated, limiting its potential for wage growth and social mobility. 
• Agricultural Dependence: Around half of India's population (46% as per economic survey 2024-25) still depends on agriculture, which has witnessed slow growth and low productivity. This leads to underemployment and low income, particularly in rural areas.
  • The agricultural sector has been neglected in terms of modernization and investment, resulting in low wages for farm workers.
• Lack of Social Safety Nets: With high out-of-pocket healthcare expenditures, approximately 63 million Indians are pushed into poverty annually. As per the FAO (2023), around 74% of the population cannot afford a healthy diet, reflecting the inadequacy of existing welfare measures.
• Gender Pay Gap: 81.8% of women work in the informal sector, earning significantly less than men. Gender-based income disparities are evident, with men earning 82% of total labor income, while women earn only 18% (World Inequality Report).
• Wealth Concentration: The Gini coefficient, a measure of income inequality, has been rising, pointing to increasing inequality in the distribution of economic benefits.
  • The top 1% of the population controls 53% of the country’s wealth, while the bottom 50% hold only 4.1%, perpetuating income inequality.
  • According to the World Inequality Report, the income share of the bottom half of the population has declined to just 13%, reflecting a deepening economic divide.
• Lack of Skill Development: Despite a young population, the skills mismatch between what the economy needs and what the educational system provides is vast.
  • Skill development has not kept pace with the demands of the evolving job market, particularly in the manufacturing and services sectors.

Corrective Measures for Inclusive Growth:

• Enhancing Agricultural Productivity: Investment in modern farming techniques, and technology can improve agricultural productivity and wages for farmers.
  • Diversifying crops, providing market access, and strengthening farmer cooperatives will help reduce uneven growth.
• Strengthen Labor Reforms: Ensuring the enforcement of minimum wage laws and providing comprehensive social security for informal sector workers are essential to improving their livelihoods.
  • Strengthening SMEs can create substantial employment opportunities, especially for rural and semi-skilled workers.
• Progressive Tax Reforms: Introducing wealth and inheritance taxes can help fund critical sectors such as healthcare, education, and nutrition. For instance, a modest 1–2% wealth tax on billionaires could generate substantial revenue to support public welfare schemes and reduce the economic gap.
• Expand Social Infrastructure: Universal access to quality public healthcare and education is crucial for building human capital and reducing long-term inequality.
  • Increased investment in schemes like MGNREGA can support employment and Universal social security schemes like PMGDISHA for financial inclusion can help reduce income disparities.
• Empower Women: Enhancing access to education, credit, and employment opportunities for women and socially disadvantaged groups is vital for inclusive development.
• Inclusive Governance: Empowering local self-governments like PRIs and ULBs ensures decentralized, need-based planning and more accountable governance.
  • To reduce regional imbalances, the government must invest in infrastructure, enhance connectivity, and incentivize industrial investment in backward areas through initiatives like SEZs and industrial corridors, thereby boosting employment and development.

Conclusion:

India's economic growth has the potential to be both sustained and inclusive, but addressing the structural challenges is key to ensuring equitable growth. Through focused policy interventions, India can overcome these challenges and pave the way for an economy that benefits all sections of society.