On the surface, India's economy looks strong heading into 2019. According to Moody's Investment Services, economic growth of approximately 7.5% is expected for 2018 and 2019. The expected growth is reflective of strong demand for goods and services and increasing industrial activity among the eight core sectors: coal, crude oil, natural gas, refinery products, fertilizers, steel, cement and electricity.
Despite India's optimistic outlook, the nation still faces deep-rooted, persistent challenges going into 2019.
1. Population Growth
India ranks second after China in total population. Its population is growing 20% per decade, leading to problems that include food deficits, sanitation deterioration and pollution. Although economic growth numbers look promising, the living standards of most citizens are not changing. According to the latest World Bank data for 2012, one in three Indians are living below the international poverty line, and there are not enough jobs to change that condition.
Malnutrition is a severe problem in India that is causing childhood stunting, anemia in women of reproductive age and overweight adult women, according to The Hindu Business Line. Only 6% of India's poor have access to tap water versus 33% of the non-poor. Sanitation is a massive ongoing problem that the government has been unable to address. For example, 21% of India's poor have no access to toilets versus 62% of the non-poor.
China, the United States and India are the three most egregious environmental polluters in the world in that order. India uses coal for 75% of its power requirements, and it has been slow to transition to cleaner energy sources. New Delhi and other cities in India are among the most polluted in the world, and car emissions in these urban areas are creating breathing and other health problems.
2. Deteriorating Infrastructure
India has struggled to improve its deteriorating infrastructure in business, education and healthcare. India's power grid is overstressed, and power failures have been daily occurrences in the most developed areas of Delhi, Mumbai and Bangalore. The need for generators to provide power and air conditioning during power failures results in additional costs that businesses must subsume.
Public transportation and roadways have not kept pace with population growth, and the education infrastructure is backward with a literacy rate of 72%. India's healthcare infrastructure is in need of reform. India provides healthcare to all its citizens, but for the 90% who must use public health services and that don't have private insurance through an employer receive poor care in substandard facilities.
To combat crumbling infrastructure, infrastructure lending has risen three-fold since 2014. For 2019, the government has increased its estimated budgetary and extra-budgetary expenditure on infrastructure to Rs 5.97 lakh crore. The Indian government plans to build 10,000 km of national highways, more than India has ever constructed, which should add 10 million jobs and 3% to the GDP. High-tech transportation with Metrino, hyper-loop, magnetic levitation and buses that run on clean fuel are included in the infrastructure reforms.
The government is also investing in water reforms, trade hubs including the development of inland waterways for transportation, port development, such as ports, coastal shipping and cruise transportation.
The Corruption Perceptions Index (CPI) ranks 180 countries and territories by their perceived levels of public sector corruption among experts and businesspeople. It rendered India the 81st most corrupt country in the world. The CPI states that efforts to curb corruption in the Asia-Pacific are having little effect and countries in the region are experiencing decreasing press freedoms and shrinking civil society. Transparency International found India to be one of the worst offenders.
Doing business in a corrupt country is difficult because there is little respect for the rule of law, there are competing government bureaucracies and there are often unclear and unfair regulatory and taxation systems.
India is set to make strides in 2019 with the injection of funds into its failing infrastructure. Investment combined with the application of new technologies and job creation will boost GDP and economic growth. However, problems such as population growth and corruption are likely to be items on the policy agenda for a long time to come.