- Consistently high levels of inflation. India's inflation has been double digits for quite some time, which makes it difficult for Indians to save money. It also makes the rupee a highly volatile currency, a characteristic that is not optimal if India is looking to attract foreign investment. Although I am not going to come up with a solution to India's inflation woes here, what is certain is that India can use a heavy dosage of monetary and financial reform.
- Education, demographics, and job skill matching. There are about 200 million Indians from the ages of 15 to 24. There is a major skills gap in India that needs to be closed, which the Carnegie Endowment for International Peace thinks can be best done by private training institutions. Considering that the literacy rate in India is 74 percent, some education and youth skill development reforms, not to mention removing labor market rigidity, are in order.
- A need for a 21st-century infrastructure. If India has a malfunctioning transit system and constant power outages, how can India expect to ascend to "world power" status? As the Council on Foreign Relations illustrates, India needs to break through the government-regulated power system and bureaucratic stalling of infrastructure projects if it wants to be taken seriously.
- Lack of property rights. India's poorest are not really able to own land, and their landlessness keeps these individuals entrapped in poverty. Looking at the World Bank's Ease of Doing Business Index (ranked 134 out of 189), maybe the government can stop its stranglehold on business and allow for economic growth to flourish in India.
- Corruption. Much like any other developing country, India has its fair share of corruption. Transparency International (TI) ranks India 95 out of 175. TI did a report in 2011 about the extent of corruption in India. If India wants to improve upon its governance, the next Prime Minister needs to address corruption.
- China. In spite of its bilateral trade relations with China, there is still a fair amount of mistrust between China and India, not to mention that India has a sizable trade deficit with China. Between further diplomatic meetings and financial reform, China will understand the importance of investing more money in its Indian neighbor.
Monday, May 12, 2014
India's Top Six Challenges After the 2014 General Elections
While we wait for the officials to count the votes of the Indian general election, it's not a matter of simply determining whether Rahul Gandhi or Narendra Modi will win the election. It's about what lies ahead for the Prime Minister of the world's largest democracy. As I pointed out a couple of years ago, India has a lot it needs to reform if it hopes to become a regional superpower, never mind a global one. Rather than look at its long-term prospectives, what I would like to do is provide a list of India's more pressing matters that can lead to the medium-to-long term growth that India desires: