Asian Studies

India has of the past two decades witnessed a booming growth of it economic. According to available reports, the nations economy has been ranked the twelfth largest on the world based on nominal value (Sinha, 2010). Ranking its economy relative to other nations based on purchasing power parity, the nation holds the fourth position in the world according to this international financial report. Many reasons have been attributed to these high growths in economy particularly since early 1990s. The 1990s saw the shifting of the nations economy from a socialist inspired economy to a capitalistic one, a move that opened up the nation to the globalization advantages of international competition and investment (Srinivasan, 2003).

Competition and a vast domestic market as well as technological advancements have played its important role in overseeing the rapid growth of the Indian economy (Srinivasan, 2003). With vast reserves of knowledgeable manpower and natural resources, the country is has been seen by economists as having the potential of becoming one among the leading economies in the globe by twenty thirty (Sinha, 2010). Indeed, some claim that the Indian economic potential, if effectively and exploited, can make it the worlds biggest economic power by the year 2040 (Sinha, 2010). However, despite the huge economic growth and more growth potential, there are a number of economic challenges that are currently threatening the sustainable growth of the economy.

Such economic challenges include relatively poor governance, lack of effective inflation control measures in place, dominance of financial markets by the government and need to expand business with neighbors as well as other international communities among others (Sinha, 2010).  Therefore, it is no doubt that the realization of sustainable economic development of the Indian economy requires many adjustments to on the political, academic, social and economic sectors on the nation (Min, 2006). This essay seeks to identify and discussion some current economic challenges affecting India.
There are many challenges facing the economy of India. Top on the list is the challenges in the nations governance system (Sinha, 2010). The sole purpose of any government is to direct its peoples economy through the formulation, enactment and implement effective and reliable policies for regulating and protecting the economy. The government of India is evidently faced with the problem of building reliably maintaining quality infrastructure (Sinha, 2010). According to available statistical information, the problems of governance in India are more pronounced from the incapability of the government as well as public agencies to cope with the increasing exceptions and demands of public services (Sinha, 2010). This has indeed been found to be a direct result of the broadening gap between physical citizen satisfaction based on availability and quality of services.

Secondly is the challenge to the Indian economy is low levels of education among its citizens (BusinessWeek, 2007). Education is a crucial tool in the long term realization of economic prosperity in any nation. The ability to read and write and skill development are quite instrumental factors due to two reasons. First, these are important in ensuring the effective and sustainable realization of economic independence by individual members of the society. Second, education serves as an opener to the realization of an ethical and highly reliable society thus it shapes the future of a nation by making the people more informed (BusinessWeek, 2007). However, despite this importance of education, available records show that a vast majority of youth either lack formal education or have only managed to acquire basic education. This is a big challenge both to the immediate and future sustainable economic development of India.

Still on the problem of education is the challenge of higher education in the nation. India is internationally known for its excellence in technical jobs (BusinessWeek, 2007). Of particular here is the information technology sector which is no doubt one among the mostly relied on in the global economy. Despite this competitive advantage posed by Indians, availability of better education to the youths remains a major challenge to the research sector of the nation (Min, 2006). According to reports from the India National Knowledge Commission, only 7 percent of youth aged between 18 and 24 have a chance of to pursue university (Sinha, 2010). This number has been considered inadequate for enhancing effective exploitation of the ultimate economic potential of the Indian nation through human resource nurturing and innovative utilization of the nations vast resources. It is indeed based on this reason that the national knowledge commission is pressuring the government to increase the number of universities to about 1,500 from the current 350 (Sinha, 2010). Therefore, improving quality and quantity of universities education is a major economic challenge facing the Indian government.

Another challenge facing the economy of India is inflation control measures (Sinha, 2010). In a nation marked with a booming economic growth and a remarkable history of stability against inflation, the worst threat remains potential succumbing to inflation crisis. The current economic inflation facing most parts of the globe has not significantly affected the Indian economy. However, the biggest challenge this rapidly growing is to mitigate the potential implications of inflation particularly to the medium and long term interests of the microeconomic sector (Srinivasan, 2003). Based on this concern, the call for adopting an inflation targeting policy which will seen reduction of governments power in controlling the operations of the nations Reserve Bank as well as abolishing all FX controls is a real challenge to the government of India.

Dealing with gross fiscal deficit has and still is a major challenge to the realization of equitable and sustainable economic development in India (Sinha, 2010). According to international statistics on gross deficits, India has been ranked on the top. According to the same reports, the governments liabilities are evidently increasing at an alarming rate with a sharp shift from under 6 percent in 2008 to an estimated slightly over 7 percent in the 2009 financial year. This has been closely attributed to unchecked actions by the government such as waiving of large debts for farmers, increase in oil subsidies, huge hiking of civil servant salaries and an increasing trend of high tax exemption by the government (Sinha, 2010). Due to these practices, government has increased its borrowing from the private sector thus compromising investment capital interest rate, a move that has increased the vulnerability of the macroeconomic sectors of the Indian nation. Therefore, balancing government expenditure and productive is increasing becoming a major challenge to realizing sustainable economic development in India.

There has been a major concern on the impact of governments dominance on the nations financial market (Sinha, 2010). True from available evidence, the government of India holds an estimated 70 percent of the banking assets in the nation and has absolute ownership of the nations pension scheme (Sinha, 2010). Still, it is a majority owner of insurance funds. This is seen as a barrier to the realization of rapid development of these key financial institutions to meet the growing demands as well as realizing a competitive advantage in the global financial market (Sinha, 2010). Moreover, there is lack of financial markets in corporate debts, derivatives and currency in India. All these have the end impact of reduced private savings, a factor that results in a low GDP. Indeed, the GDP of India is found to be far way below those of other nations in the Asian region. This makes failure by the government to liberalize its financial market a reason that negates the effective growth of the nations GDP.

Expansion of business influence in the international is also a challenge facing the India government (Sinha, 2010). It is no doubt that over the past decade, the Indian trade with the rest of the world and economy in general has been booming. This is closely associated with low tariffs given by Indian authorities as an incentive for investors and businessmen. However, such improves have not been effective in their perspective as tools for increasing international business (BusinessWeek, 2007). Statistical evidence clearly shows that the Indian nation only accounts for an estimated not more than 1.6 percent of the global trade. Though Indias trade with the US and the Chinese republic is witnessing a sharp increase, the transactions are still remaining too low. Just as an example, the Indian nations trade with the American nation as per the year 2007 was only estimated at 42 billion compared to that between China and America which was approximated to be 405 billion. Still to be noted is that the trade between China and India was only 37 billion (Sinha, 2010). This has the implication that the economy of India is still to overcome the challenges of international business expansion.

The problem of low agricultural productivity in the nation stands high as a challenge to the economy of India (Sinha, 2010). Agricultural productivity improvement in India is not only seen as a source of sustainable food supply to the large population but more as a source of on enhancing the economic independence of its citizens. According to the nations employment statistics, it is evident that an approximated 60 percent of the Indian population is employed in the nations agricultural sector Srinivasan, 2003). Nevertheless, despite this, the agricultural sector only contributes an estimated 1 percent of the overall economic growth in the nation. Efforts to promote this key sector are compromised by the challenges posed by poor fiscal policies by the government, a move that threatens the realization of reliable growth in the sector. Environment has become an issue of concern by the government. Although currently the nation is in the process of urbanization and industrialization, it has been claimed that such economic process coupled with the global climate change problem are a potential threat to the future sustainability of environment thus posing a big challenge to the government in seeking to formulate and implement environment conservation policies that do not compromise the economic development process (Srinivasan, 2003).
Lastly, infrastructural improvement to match the ever increasing economic demands is a challenge affecting the Indian economy (Sinha, 2010). With the current increase in business in the nation, infrastructure is very important for Indias sustainable economic growth. It has been established that the nation is adequately facing a major transport support problem. Airports are clogged, most roads are in very poor conditions and delays at the ports are a common thing (Sinha, 2010). These are quite detrimental in realizing prosperity of businesses. Electricity supply as a major driving force in a nation is a great problem in India. Statistics show that companies lose an estimated 30 days per year of electricity connection. Infrastructure is thus a challenge that the government has to deal with to ensure sustainable economic development in the nation.

In conclusion, it has been established that Indian economy is faced with many challenges. These include lack of or poor education and poor governance policies which serve to hinder progress in the nations. Infrastructure as a crucial requirement for economic development is poor in India (Sinha, 2010). Others include governments dominance of the financial market, low agricultural productivity, poor fiscal policies, and relatively low international business contribution to the nations economy. All these call for the government of India to invest more efforts in implementing changes if sustainable economic development is to be realized