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CHAPTER 40 CONSTRAINTS ON GROWTH AND DEVELOPMENT
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CHAPTER 40 CONSTRAINTS ON GROWTH AND DEVELOPMENT 1
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A35CHAPTER 40 – CONSTRAINTS ON GROWTH AND DEVELOPMENT
Question Remarks
INDIA TODAY
EXTRACT A: CHALLENGES FOR INDIA
India is growing at 7.2 per cent a year, making it the fastest
growing economy in the world. The savings rate, which was less
than 10 per cent of GDP at independence, now stands at about
30 per cent, as the ratio of dependants to workers in the
population has decreased. Much of India's success is a result of
savings being put to productive use.
However, the World Bank has calculated that India would need 8
per cent growth every year for the next 30 years to become an
upper-middle income economy. Only three economies have
achieved close to this in the past: Taiwan, South Korea and
China.
Sustaining high growth is essential. India has one of the world's
youngest populations with a median age of 28. A third of 15- to
29-year-olds are not in school, training or jobs, Every year, 12
million young people enter the workforce. India needs to create
a million new jobs each month. Even in the best of times, it has
managed only half that, yet surveys show that 60 per cent of
Indian employers report difficulties in filling jobs.
International surveys give India a low rank for the efficiency and
honesty of the state. Problems include the waste of state
resources on inefficient subsidies. Transparency International's
2018 Corruption Perception Index ranks the country in 78th
place out of 180 countries. Public confidence in the machinery of
government is low, which is shown in falling turnout and tax
evasion.
Although the ease of doing business is good in some ways, such
as getting permits or bringing in foreign capital, there are still
bureaucratic hurdles. For example, private businesses find it
almost impossible to secure land for new factories and large
sections of the economy, from coal and steel to banking, remain
at least partly under state control.
India needs to tackle its long-term problems of inadequate
education and health care, weak infrastructure, corruption, poor
law-making, excessive state interference (industries from coal
and steel to banking remain at least partly under state control)
and government waste.
India's new goods and services tax, introduced in July 2017, is
designed to make India a single market for the first time. Some
claim this could create annual GDP gains of 8 to 10 per cent,
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