3 Economic Challenges for India in 2019

On the surface, India's economy has been strong for the first half of 2019, with the BSE30 (an index that tracks 30 financially sound Indian companies) returning over 7% since January 1.

According to Moody's Investment Services, economic growth of approximately 7.5% is expected for 2018 and 2019. The expected growth is reflective of a 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.

However, despite India's optimistic outlook and recent stock market bull run, the nation still faces deep-rooted, persistent challenges in 2019.

Population Growth

India ranks second after China in its total population. Its population has grown 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.

One in Three

Indians live below the poverty line.

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 has access to toilets versus 62% of the non-poor. Most of those without access are people who live in urban slums and rural areas. A large populace in the rural areas still defecates in the open.

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.

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 the 90% who must use public health services and 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, hyperloop, 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 78th most corrupt country in the world in 2018.

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. 

Looking Forward

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.

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