Bottlenecks Of Indian Economy: Methods For Improvement And Effective Performance

What are the bottlenecks of Indian economy?

What are methods that should be adopted to improve the economic performance and growth?

Which are the ways to make the Indian economy perform effectively?

How can the economic targets of India as a faster-growing economy be fulfilled?

The bottleneck is defined as one neck of the bottle which is very crucial in leading to the development of any business model. Bosworth, Barry, Collins, & Virma, (2016) asserted that mechanical development and advancement is an immediate result of the focused procedure that outcomes from inside, in light of the fact that disclosure is controlled by the things individuals do in organizations. By conveying new thoughts and practices to an industry, they trigger its further advancement. In various ventures over the world, organizations are presently presenting new plans of action that attention on a particular stride of the esteem chain and, by this, change or even obliterate the upper hand of firms with coordinated esteem chains (Anand, 2006). This advancement of deconstructing vertically incorporated esteem chains is called 'deconstruction'. Thus of this handle, new plans of action with unmistakable qualities create and are changing the tenets of rivalry for setting up organizations and enterprises in phenomenal ways.

In 2014, the World Bank listed India among the countries that could not meet their pre-crisis economic growth rate even though the macro risks had been eased. Some of the bottlenecks that had been listed to hold back the economic growth and development were a political bottleneck, infrastructural bottleneck, funding bottleneck, supply bottleneck, and structural bottleneck. If these bottlenecks are met, India can achieve its targeted growth rate of 9.0%- 9.5% per annum between 2012 and 2018 (Virmani, 2005). First, the study will examine the how each of these issues impacts the economic growth and development. And second, there is the need to address the issues to achieve the anticipated economic growth. Therefore, the focus would be on the methods that can be applied in solving the bottlenecks.

India should be among the global thriving economies by 2015 among countries like the U.S., the UK, China, Germany, Brazil, Japan, and France. There is the need to overhaul the current economic policies and choices to achieve the targeted 9.5% economic growth rate yearly. The main objective of the study is to identify the specific bottlenecks that hinder the Indian economic growth and then suggest several methods address them.

1. To identify the bottlenecks of Indian economy.
2. To establish the methods that should be adopted to improve the economic performance and growth.
3. To identify ways for the Indian economy to perform effectively.
4. To fulfill the target of economist of India as a growing faster than other

Research Aim And Objective

Addressing the bottlenecks adversely affecting the effective performance of the Indian economic performance is fundamental. There is the need to explore the full potential of the economic resources and channel enough funding towards the success. There are a number of bottlenecks that make it a challenge to achieve the economic full potential. The existing gap between the actual and needed economic growth rate; this forms the basis of this research study. First, the study will focus on establishing the bottlenecks that hinder economic performance to its full potential. Second, the study seeks to establish the necessary interventions to resolve the bottlenecks and improve the performance.

To answer the research question, data on the statistical performance of the Indian economy will be obtained and analysed. The focus would be on the identified bottlenecks which are; political, infrastructure, funding, supply, and structural. Second, professional opinion from economic experts, corporate CEOs, and government economic policymakers will be collected. This will be done through conducting interviews and providing them with a questionnaire to fill. The collected data will then be analysed to obtain concrete results.

This section evaluates the existing scholarly and reports on the existing bottleneck on Indian economy. The review summarises, evaluates and clarifies the literature. The literature review provides the researcher with theoretical base of understanding and determining the nature of conducting the research (Bryman & Bell, 2011). The focus would be relevant literature while the irrelevant ones will be discarded. The literature has been guided by the research problem, objective and the bottlenecks being addressed. Lastly, the literature provides the conceptual basis of the research topic.

The Indian economic development was based on social-oriented policies for a long time since independence. Many sectors are owned by the states. The country’s per capita income has been growing at a 1% rate per annum for the last three decades. This is against the estimated growth of 2.5%-3.2%. However, the government shows the need of opening up its economy via economic liberation in the 1980s (Virmani, 2012). The government introduced new economic reforms and policies in the 1990 and 2000s which have compelled India towards becoming a free market economy.

In the 2000s, India registered and economic growth rate of 7.5%. This is the highest rate to be ever recorded over the last one decade. It was projected the growth rate would double in a decades time if fundamental reforms were pushed further. By addressing the issues such as funding of investments, infrastructures, agriculture, economic policies and opening doors for multinational corporates, the government expects the economy to surpass the 10% growth rate (Balachandran, Cox, Kumar, Dilip, & Roy, 2015). According to the economic reforms strategic plan, the Indian government projected the economy to grow at a rate of 9.0%- 9.5% per annum between 2012 and 2018. Among the states with the leading annual growth between 199 and 2018 were; Tamil Nadu at 9.9%, Gujarat at 9.6%, Haryana at 9.1%, Delhi at 8.9%, Bihar at 5.1%, Uttar Pradesh at 4.4%, and Madhya Pradesh at 6.5%. India is the tenth largest economy globally and the third largest based on the power parity adjusted exchange rate (PPP). Likewise, India ranks 140^th globally based on its Per Capita Income (Anand, 2006).

Economic Development and growth of India

The India’s economic growth relies on service expansion that has been consistent with its growth compared to other economic sectors. Until recently, the Indian government was not investing heavily in industrialization to expand its economy. Other issues that have been associated with poor economic grow are a high level of unemployment and poor development of the infrastructures (Ghate, Pandey, & Patnaik, 2013).

The macroeconomic factors have performed favourably however the progress has not been significant enough to reduce the country’s poverty level. Since 1991, the rate of poverty reduction has not been higher even after the introduction of the economic reforms. The improvement of another social development sector, which has non-economical dimension, have not brought significant improvement (Dasgupta, 2012). For example, the level of malnutrition has remained high and consistent among the Indian children especially among the poor Indian population. The level of child malnutrition was 46% between the 2005 and 2006 financial years (Straub, 2011).

While recommending the progress of the India’s economic reforms, the World Banks suggested that more priorities should be on infrastructures, reforms in the public sector, rural development, agriculture, addressing HIV/AIDS, eliminating labour regulations and boosting reforming in the economic lagging states. According to a study conducted by the international bank in the countries with the ease to do business with index in 2005, India ranked 142 behind China at 90, China at 62 and Brazil at 120 (Singh, 2005).

This clearly shows that India still has a long way to go as far as economic reforms and progress is concerned. It is evident that the government and other economic agencies have not adequately addressed the identified issues that hold back positive economic growth; these are referred to as economic bottlenecks. This paper focuses on the impact of political, infrastructure, funding, supply, and structural bottlenecks on India’s economic growth and development (Kumar & Wyman, 2017).

The government’s decision and political stand are large to blame for the slow economic growth. In 2012 the economy registered the lowest growth rate in Nine years of 5.3%. The country’s currency, rupee, lost its exchange value in the financial market.  Experts believed that the economic mess was self-instigated. The coalition government lacked clear leadership and acted on conflicts of interest. The policy reforms were aimed at pleasing their friends causing a road block for the favourable economic reforms.   For instance, the government reversed its earlier decision to open up India’s retail sector for the international investors in 2012 (Maiti, 2014).

The government could not control the growing debt level. The government’s debt stood at approximately 70% of the country’s GDP. Moreover, the fiscal deficit was 6.0% of the GDP in 2012 which was higher than 4.8% in 2011. This level of debt raises a lot of economic questions. The debt and increased spending by the government were not investments driven (Mishra, 2013). A third of the government expenditure was subsidies and interest payments. Although the government would have focussed on investing in social projects to benefit a large position of the population, this was not the case. Likewise, the government spent a large portion of the money to bail out stated owned enterprises like the Air India. The huge spending should be regarded as misallocation of resources because no revenue was generated from them (Singh, 2005).

Neither the government nor the parliament showed a lack of clear policies and mandate to solve the political issues affecting the country’s economic development. For objective economic growth, the leaders should have long-term reform objectives beyond the election cycles. However, the current leaders focus more on their personal interests therefore economic-oriented leadership seems unlikely to be implemented (Virmani, 2012).

Inadequate development of infrastructure has been a major roadblock towards achieving the projected economic growth of 9.0-9.5% yearly between 2012 and 2018. The major factors that hinder India’s infrastructural development are; delayed decision making, skewed policies on land acquisition, corruption, environmental clearance problems, inadequate fuel and energy to support the production sector, and lack of private sector in investment decisions (OECD, 2012).

With the increasing urbanization, India requires rapid infrastructure development to support economic growth. With the rapid urbanization and industrialization, the country requires a stable and sufficient supply of fuel and energy. The roads and railways should also be sufficient enough for connectivity. However, there is a lack of adequate foods to support the development of the required infrastructure (Straub, 2011).

The government should come up with clear and transparent policies that support the development of infrastructures. Likewise, the government should abolish constraints imposed on land rights, as well as secure long-term funding for infrastructure development. The fate of the India’s infrastructural development depends on the proper execution of political reforms and policies by the leaders (Schofield, Horrell, & Reis, 2015).

Even with the recognition of inadequate infrastructure as a hindrance to economic development, funding its development is quite a challenge. The government is spending a bigger portion of its funds on paying debts and subsidies leaving an insignificant share in transport and logistics. The huge financing gap has led to underdeveloped Indian road and rail network which has affected the consumers and producers due to inefficiencies of produce movement (Anand, 2006).

The government should operationalize financial channels to address this issue. Several steps have been put in place to address the financial bottleneck. From the beginning of the 2013/2014 financial year, both the federal and state governments raised their financial allocation on infrastructural projects (Singh, 2005). For instance, the Federal government created the National Investment and Infrastructure Fund (NIIF) in 2016. This is a big step towards improving the infrastructural network in the country. The NIIF pools 40,000 crore rupees (half of the funds come from the government) which are then used to fund Brownfield and Greenfield projects as well as stalled infrastructure investments (Maiti, 2014).

The financial risks that impacted the global economy in 2008 are major hurdle on India’s economic development. Although the economic growth improved slightly between 2013 (5.1%), 2014 (5.6%), and 2015 (5.7%). The volatile nature of the country’s exchange rate is a major cause of low growth. The economic growth is characterised by high depreciation level, high rate of unemployment, and weak business and consumer confidence (Anand, 2006).

The developing economies like India heavily depend on developed countries like the U.S. and the UK to support their economic development. However, with the high level of unemployment in Europe show slow economic growth in India. The country’s annual economic growth dropped below 6% in 2013, 2014 and 2015. There were concerns that just like the UK, the U.S. would be reducing its financial support to India. Such a decision would bring about a lot of consequences (Dasgupta, 2012).

The structural bottleneck is a major barrier to achieving higher growth even after India reduced restrictions on foreign investors. The hindrance issues are difficult to land acquisition policies, weak power supply, and transportation network, ill-targeted subsidies, delayed project approval, low productivity in agriculture and manufacturing sectors, skill mismatches and unfavourable labour laws (Singh, 2005).

As a member of the World Trade Organization (WTO), The Indian government is addressing the structural bottleneck by; investing in education and infrastructure, eliminating over regulation to simplify business environment and increase predictability in investment and trade sectors. In addition, there is the need to provide stable and sustainable policies supporting the Foreign Service trade and merchandise, linking procedures, incentives and rules with those of the WTO and the Foreign Trade Organization (FTO) (OECD, 2012). Furthermore, India’s exports should be diversified as well to make its agricultural and manufacturing sectors competitive in the global market. Lastly, the government should align its trade architectures of engagement with those of key trade regions globally (Dasgupta, 2012)

Conclusion

The reviewed literature supports the research topic and question. There is a clear indication that the India’s economy has been performing poorly due to the bottlenecks discussed above (independent variables). Seemingly, the government has put several mechanisms in place to address the issues. This is enough evidence indicating the need to come up with an intervention plan so that the economy can perform as required i.e. achieve the 10+% growth rate per annum (Adam, J & Kamuzora, F.K, 2008).

The methodology chapter covers the research design chosen to address the research topics such as data collection and analysis techniques. It provides an insightful procedure to be followed when conducting the research. This research will follow both quantitative and qualitative research strategy (Maxwell, 2005).

In conducting the study, both the qualitative and quantitative strategy will be followed because they fit the research topic. The qualitative research approach is concerned with qualitative phenomena. As a researcher, I am interested in investigating the bottleneck issues facing the Indian economy and the interventions taken by the government and other economic bodies to address the issues (Adam, J & Kamuzora, F.K, 2008). Likewise, the quantitative strategy will focus on analysing the statistical data to understand how the bottlenecks have impacted the economic development and whether or not the government interventions have been fruitful.

Both the primary and secondary sources of data shall be used. Interview method is the most useful and effective to gather data on the bottleneck issues facing Indian economic development because it offers direct contact with the participants. Interviews offer the opportunity to obtain detailed and insightful information on the research topic. The first-hand information would be obtained from the CEO of different departments of Indian sectors, economists, government representative, and scholars will provide an opportunity to understand the topic better. Each interview will take between 50 and 60 minutes (Bryman & Bell, 2011).

The Structured and Semi-structured questionnaire will be used to collect qualitative and quantitative data from the participants. The structured question will comprise of both open and closed questions. Likewise, the semi-structured questions will allow the researcher to add more questions after exhausting those on the list. The semi-structured approach also allows obtaining clarification on the questions contained in the list (Saunders, Lewis, & hornhill, 2009).

The already existing data of the economic growth and development like foreign trade, inflation and the growth of the service sector will be analysed to support the research findings.

Both qualitative and quantitative data analysis techniques will be used to analyse the collected data. The qualitative analysis will be based on the concrete of the information collected from the interviewees and participants. On the other hand, Microsoft Excel and IBM SPSS analytical tool will be used to analyse the statistical information obtained (Adam, J & Kamuzora, F.K, 2008).

The findings will be presented using tabulation forms such as graphs, tables which provide a numerical aspect of the information. Likewise, qualitative data will be presented by forming an inclusive opinion based on the critical views from the experts (Bryman & Bell, 2011)

This is the proposed budget for the research project to be conducted to address the research topic

This is the research schedule for the research project due in November 2017 (the student to edit the actual date).

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