19 charts that explain Indias

economic challenge

05 Nov 2015

Gemma Corrigan
Economist, World Economic Forum

Attilio Di Battista
Economist, World Economic Forum

India has come a long way in modernizing its economy, reducing poverty and im

Its economy has been one of the largest contributors to global growth over the la
GDP per capita in PPP (purchasing power parity) terms is today three times as h

Yet, this period also witnessed a rise in inequality, which has been mainly driven
largest number of poor in the world (approximately 300 million are in extreme po

Growth has slowed in recent years and several challenges remain unsolved. Brin
makeIndia more resilient for the future.
one of the largest and youngest populations in the world, India needs to create m
its citizens.

The country is often cited as an example of an economy that is modernizing by j

India has been relatively stable over the past two decades, at much lower levels
share of economic activity in India than in Europe.

Will India be able to achieve shared prosperity without a growing manufacturing

still employs about half of the Indian population. Productivity in this sector did no
The competitiveness landscape

After five years of decline, Indias competitiveness improved notably this year
55th of 140 economies.

This improvement can be largely attributed to two main factors.

Firstly, macroeconomic conditions improved significantly. Inflation eased to 6% i

gradually dropped since its 2008 peak, although it still amounted to 7% of GDP

Secondly, the country benefits from the momentum initiated by the election of N
communitys sentiment toward the government. Infrastructure has also improved
basic drivers of competitiveness bodes well for the future, but other areas also d
How inclusive is growth?

Despite Indias relatively strong record in terms of economic growth over the last

India must take further action to ensure that the growth process is broad-based
employed in informal and low skilled jobs. Educational enrollment rates are relati
performance among students from different socioeconomic backgrounds.

The gender gaps in labour force participation and wages are both high, showing
of access to finance for business development and real economy investment (inv
by administrative burdens. India also under-exploits the use of fiscal transfers co
Modernizing Indias public institutions

Modernizing public institutions has been high on the agenda of reforms in India i
corruption among public officials and showed more trust in governments decisio
Yet, there is still a lot of ground to cover.
favourable business environment, which includes strong property rights protectio
the judicial system and increasing efficiency in settling disputes will be key. Busin
standards are necessary to ensure transparency in the private sector, increase tr

Talent, education and social mobility

Educational enrolment rates are relatively low across all levels: barely above the
and tertiary levels.

Only 1.4% of secondary students are enrolled in technical and vocational progra
gender gap continues to persist, with boys benefiting from two more years of sch
educational opportunities for men and women, which translates into low levels o
attainment between children from the top and bottom quintiles in India is 8.7 yea
top income quintile receiving 11.56 years. The disparities in educational attainme
important in transmitting inequality down the generations. The gap is much smal
having the best educational outcomes in this peer group on average (nearly 5 mo
Unequal access to finance

India scores relatively well in terms of access to finance for developing businesse
venture capital, and equity markets than their counterparts in most peer countrie
million people remain unbanked in India and disconnected from the financial sys
individuals in bottom quintiles and 37% of women have access to a bank accoun
Barriers to Entrepreneurship

Yet, only 7% used their savings account to start a business (the proportion is eve
business ownership is evidently not for want of good ideas, as India scores fourt
inefficient justice system, with relatively low rankings for indicators such as the ti

Closing the infrastructure gap in India

Infrastructure development has not keep up with the increasing needs of the eco
infrastructure. In a recent report, the World Bank estimates that India might need
cannot be borne by the government alone and will require more private investme
year on average from 2009-2013.
A quarter of Indians still do not have access to electricity and almost a third of th
and access remains unevenly distributed. This is also the case for clean drinking

Modernizing transport infrastructure will be particularly important to increasing In

Operational airports are still out of reach for large parts of the country given that
the flipside, the railway system performs relatively better than other modes of tra
Nonetheless, investments are needed to improve the speed and efficiency of the

Connecting India

Despite many clusters of excellence in the IT industry and a vibrant service secto
entire population. Regulation of the ICT sector is among the most competitive in
low. Fewer than one in five Indians access the Internet on a regular basis, with on
significantly in recent years). Smartphones are the privilege of the very few, with
estimated to own even a basic cell phone.
India has been slipping behind other countries in developing Asia over the last d
region. Since then, countries such as Thailand and the Philippines have experien
physical and human capital to bridge the gap with other emerging markets. ICT c
wonders in improving productivity in agriculture and the services sector, while bo
Indias tax tystem and social safety net

Some countries effectively use redistribution to reduce inequality, but India is not
lower middle income countries and is barely changed by fiscal transfers. Tax reve
burden than the rich, which is not offset by social spending. The country spends
India has a great deal of opportunity to enhance the generosity and progressivity
participate fully in the economy and society.

Increasing its narrow tax base can also give India more fiscal space to make thes
limited in coverage. Out-of-pocket expenses are high, limiting affordability. This t
while in many peer countries like Thailand and Vietnam there is only around 10 y
The way ahead

To achieve both economic growth and social inclusion, India should focus on a n
Authors: Gemma Corrigan,Economist, Economic Growth and Social Inclusion In
World Economic Forum.
Image: Passengers ride an overcrowded bus as they head towards their village to

Written by

Gemma Corrigan, Economist, World Economic Forum

Attilio Di Battista, Economist, World Economic Forum

The views expressed in this article are those of the author alone and not the World Econ

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