India’s Economic Growth and Domestic Consequences

As one of the largest and fastest growing economies, India is setting the world stage as a force alongside China, the US, and the EU. While its GDP growth percentage has declined in recent years, it has kept around 5-6% average per year, with 2006 at its highest at 9.2%. While it has benefited the economy, this expansion could create issues for India’s lower segment.

There is the issue that the growth of the economy may benefit the more urban regions or a select group while failing to aid those facing poverty, inequality, or lack of basic infrastructure. Those living in worse off regions face lack of water, government assistance, housing, and other problems. A clear divide between the rich and poor can be seen in not only urban centers, but comparing a urban center to the more rural areas of India.

India’s history in terms of economics has transitioned from a socialist model to a more open market system. One similar case within a similar time frame is Egypt after 1956. With Nasser in power and the image of Arab Nationalism set in place, Egypt focused on a socialist economy to provide for every Egyptian. Although their issues were met, the economy hardly saw any growth and Egyptians rarely rose above the standard level of living set by the government. After the liberalizing of the economy under Sadat, the issue of inequality and lack of adequate infrastructure exponentially came about.

Not all nations and their respective economic history are exactly the same, but a pattern and sense of cause and effect can be examined through these cases. It is important to consider other economic transformations and its outcomes in order to find all possible solutions and come up with contingency plans.

The challenge for India is to examine past economies and its future direction. To prevent a domestic economic crisis, India must look to invest in its infrastructure and to help include all Indians in this emerging market. It is typical to experience different classes in the open market model, but extreme cases of inequality has the potential to creating greater instability both for the government and the economy.

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