How is growth different from development? How does economic growth lead to employment? What are the issues faced by India concerning growth, development and employment? Read further to know more.
Growth. development and employment are all interconnected terms in economics.
In this article, let us examine how they are interlinked.
Growth, Development and Employment
A discussion on growth should begin with the definition of growth. Growth in economic terms corresponds to the increase in GDP (national income). [GDP is the money value of goods and services produced in an economy. So, in layman’s terms, growth means more money. Wow! that’s simple, right?] So how can a country grow, or increase its national income?
The above question cannot be solved with a one-word answer. Had that been the case, our Honorable finance ministers would have been always enjoying a pleasure tenure. A country cannot increase its national income by printing currencies or borrowing money from abroad.
Former Prime Minister Manmohan Singh once said, “Money does not grow on trees”. For a country to grow, it has to produce more goods and services. For that purpose, the optimum utilization of resources within the boundaries of the nation is essential. Of course, the funds can come from abroad (foreign investment), but without proper utilization of resources in a country, there cannot be sustainable growth.
Growth and Development
When the national income increases (growth), ideally it should result in development (qualitative aspects – like health, education, employment etc.). There can also be cases when growth does not percolate to the bottom of the pyramid – non-inclusive growth – that will not result in the development of weaker sections of society. For sustainable development, inclusive growth is a must.
Growth and Employment
Growth generates employment and employment generates further growth. In general, employment corresponds to the qualitative aspect of growth. If a country is on a growth trajectory, it will generate more employment opportunities and while the growth declines ( periods of recession), people start losing jobs.
Back to the growth topic again…
How to generate growth? What are the issues in growth, development and employment? Is India growing? Are there issues with India’s growth or development? – There should not be any doubt about the fact that India is growing. India is now growing at 5% per year. But the problem with India is that it was growing at nearly 9% three years ago! So the growth has declined – That is the first issue with our growth.
Challenges in India’s growth, development and employment
- India’s growth is declining. (currently at 5%).
- India’s growth is largely contributed to by the service sector. There is stagnation in the manufacturing sector.
- Indian agriculture is still heavily dependent on monsoons. Nearly 50 % of the population is dependent on agriculture which contributes only 14% of GDP.
- For a country to grow, there should be investment in productive areas. There should also be supporting infrastructure. Currently, India has issues in both.
- Due to external and internal factors, there is a decline in foreign investment. This is widening our Current Account Deficit.
- To provide welfare schemes, subsidies and defence expenditure, India is borrowing. The Fiscal Deficit of India is enlarging.
- India’s export sector is not growing by the demand for imported goods.
- Growth is not entirely inclusive. There are still a significant portion of people below the poverty line.
- There are issues with employment too. Though the unemployment rate is in the single digits now, most of the employment in India is disguised as unemployment. (In the agricultural sector). The average salary and per-capita income of Indians are very low.
Economic Growth and Development Challenges
- Inequality and Poverty: Economic growth has not translated uniformly across regions or demographics. Wealth disparity is increasing, with a high Gini coefficient and a concentration of wealth among the top percentile of the population. This results in poverty persisting in rural and underserved areas, especially in states like Bihar and Uttar Pradesh.
- Education and Skill Gaps: India has a young workforce, but there is a significant mismatch between available skills and industry demands. Educational institutions often fail to meet the standards for skill-based training, leading to a workforce with inadequate vocational and technical skills. This affects employability, especially in industries requiring digital skills, technical knowledge, or specialized training.
- Infrastructure Deficiencies: Basic infrastructure issues, including inadequate transportation networks, limited access to reliable electricity, and poor digital infrastructure, limit growth and development, especially in rural and semi-urban areas. Investment in infrastructure, though ongoing, remains insufficient to bridge these gaps and fuel sustainable growth.
Employment Issues
- High Unemployment and Underemployment: Although India’s economy is growing, job creation has not kept pace with the expanding workforce. The unemployment rate remains high, particularly among young adults and educated segments. Underemployment is also widespread, with many workers in part-time or seasonal jobs, especially in the agriculture sector.
- Predominance of the Informal Sector: Over 80% of India’s workforce is employed in the informal sector, which lacks job security, health benefits, and adequate wages. This is common across industries such as construction, agriculture, and small-scale manufacturing, making it harder for workers to attain economic stability and benefits associated with formal employment.
- Slow Manufacturing Growth: India’s manufacturing sector, targeted by initiatives like “Make in India,” has seen slower-than-expected growth. Challenges include complex regulations, infrastructural bottlenecks, and limited access to credit for small and medium enterprises (SMEs), which are primary employment generators.
- Gender Disparities in Employment: Female labour force participation in India is among the lowest in the world. Social norms, lack of childcare support, and safety concerns restrict women’s ability to work, particularly in rural areas and lower-income groups. This reduces the overall productivity of the economy and limits household incomes.
Policy and Governance Hurdles
- Bureaucratic Red Tape: Bureaucratic procedures and complex regulations make it difficult for new businesses to start and operate smoothly, particularly affecting smaller businesses and startups. Reforms targeting ease of doing business are ongoing, but red tape remains a significant hurdle.
- Fiscal Constraints: India’s fiscal deficit and debt levels limit the government’s ability to invest in growth-promoting sectors such as infrastructure, healthcare, and education. Although there is a drive toward economic reforms, fiscal constraints make it challenging to allocate adequate resources for these initiatives.
Policy Recommendations
- Strengthen Education and Vocational Training: Improving education and aligning vocational training with industry needs can create a more skilled workforce that meets the demands of emerging sectors like IT, renewable energy, and advanced manufacturing.
- Boost Rural Development and Agriculture: Given the large rural population, developing the agricultural sector, investing in rural infrastructure, and promoting non-farm activities can create employment and support growth.
- Focus on Women’s Employment: Policies that enable women to enter and stay in the workforce, such as better maternity benefits, safe transportation, and childcare facilities, would improve labour force participation and economic stability.
- Formalize the Informal Economy: Encouraging the formalization of informal workers through labour reforms, social security measures, and employer incentives can improve job security and increase tax revenues.
Conclusion
Addressing these challenges is essential for sustainable growth which includes employment generation, poverty reduction, and economic equity. Long-term structural reforms, alongside focused investments in human capital and infrastructure, are crucial to ensuring balanced and resilient development in India.
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[Growth, Development and Employment: Specifically mentioned in Civil Service Mains GS Paper 3. It can also be asked for Prelims and Interviews]
plz write notes on inclusivev growth and issues arising from it-gs3
Easily understand by anyone
Thanks
Please write note on inclusive growth & issues arriving from it
Before Dr. Manmohan Sing , my grandma told me ” money does not grow on trees”