To maintain growth rates of 6% and prevent inflation and unemployment rising in the future there are various issues the Indian economy needs to address.
Quality of infrastructure, Many areas of India are not well serviced with poor transport links and under developed communication channels. A lack of energy supplies have also led to power shortages in certain areas. These problems are likely to exacerbate with both a growing population and growing economy.
Environmental costs of growth. The high economic growth has led to a burgeoning middle class who have benefited in terms of being able to buy more cars and consume more. However this has led to increased problems of pollution and congestion. This issue is magnified by the excessive crowding faced in many Indian cities.
Some economists are of the opinion India needs to try and control its growing population levels to provide a more stable economic and social environment remove more barriers to entry.
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The Indian economy is still highly regulated with costs and restrictions faced to business’ wishing to enter certain markets. This continues to limit entrepreneurship and their removal is important to continue the flows of inward investment.
Unemployment could be a problem despite the fast growth of the economy. There is an increase in the number of people entering the Indian labour market; particularly young women. It may be difficult to provide sufficient jobs unless investment continues in manufacturing and the service sector skills shortage.
Although the Indian economy has relatively good levels of education, there still exist severe skills shortages in certain areas such as IT. There is also a growing gap between rich and poor in different areas of the country. There is need for a concerted effort to increase both academic and vocational skills to a broader section of the population.
A large % of the India’s agriculture is still dependent on the monsoon season. E.g. in 2003- 2004 agricultural growth fell from 9% to 1%. To overcome these fluctuations the agricultural sector needs increased investment in irrigation and water supplies.