Strength, Weakness,Opportunity and Threats of Indian Economy

1. SWOT Analysis of Indian Economy
India is the ninth largest economy in the world in terms of GDP. The Indian Economy
due to its peculiar trends has been a subject of interest for the world. After
independence, the Indian economy was more like a socialist economy: democratic,
large public sectors and heavy regulations on private sectors. Around the 1990s the
economy reached a point of stagnation. Then, in 1991, India saw the largest economic
reforms pioneered by Dr Manmohan Singh, the then finance minister. These changes
improve the rate of economic growth and social development. Economists predict that
the Indian economy will be the third largest by 2025, after the USA and China.
Strength:
The strength of the Indian economy lies in its robust nature, which is evident from its
constant growth even during times of recession (2008-09). The banking and credit
system has been able to survive the downturn due to heavy regulations imposed by the
RBI. This brought more transparency to the system.
Another important factor that forms the spine of the Indian economy is agriculture,
because it employs nearly 50% of the total population. Although agriculture shares
only 18.5% of GDP, it makes India self-reliant in terms of food supply. Today, India
is a leading producer of a number of agricultural products that give a boost to the
export value. The youth of India, which makes a large part of the population is an
advantage as it constitutes a huge work force.
Weaknesses:
Primary weakness of the Indian economy is its excessive dependence on agriculture.
Since agriculture is monsoon dependent trade, production can vary by large margins
and cause turbulence in the economy. India also lags behind in social development. A
large part of the population is still living below the poverty line. Another weakness is
the literacy rate. Although we have achieved high progress rates in terms of GDP,
more than a third of the population remains illiterate, thus, easily exploitable.
Opportunities:
India has ample opportunities for growth. The agriculture sector and SMEs need to be
encouraged and assisted as they have high potential. Indian government should focus
on defining and properly implementing the policies for rural development, as most of
the population resides in rural India. Also, there is a scope for large-scale
infrastructure development and a need to properly carry out the MNREGA, JNNURM

2. and other schemes, so that the benefits penetrate to the lower level of the population.
Tourism is a thriving industry in India and we need to harness its potential. It will help
raise our foreign reserves and create employment opportunities.
Threats:
Terrorism and corruption are the greatest threats that India faces. It is because both
hamper the growth of people and trade, which is a must for overall economic growth.
The rising inflation, hording and black-marketing, also pose a threat to economic
development. Economic growth, mainly the exports, has seen a downward trend due
to the worldwide economic downturn and has become a cause of concern. The Indian
government needs to redefine its policies and bring more stringent reforms to steer out
of this turbulence.
The Strengths are:
1. The South-West Monsoonhasbeengood thisyear providing boost torural
economy and may bring down pressure on food prices
2. Foreign exchange reservesat $278billionare sufficient to cover about six
months of imports
3. Steep fall in rupee may help India’s manufacturing sector with potential
for higher exportsprovided Indianproductsarepriced competitivelyabroad
4. Growing wealth effect: Spurred by rising gold and real estate prices,
Indians’ wealth has gone substantiallyin the last decade, providing boost to
domestic consumptionthough consumptiongrowth ratesmaycomedownin
future
5. Savingsrateis high at around 30 per cent though it has come down in the
last three to four years (of course, the high savings rate is mainly due to the
fact that common people have no social security)
6. India’s population is very young providing good demographic benefits in
the form of higher productivity and higher consumption of goods and
services

3. 7. Poverty has declined substantially of late though we are plagued with
malnutrition, lack of potable water & sanitation, and illiteracy
8. Thelevel of entrepreneurship hasgoneup substantiallyafter liberalization
9. India has vast natural resources, such as iron ore, coal, water and arable
land
10. India’s skills in export sectors – like, software services, engineering
goods, gems& jewellery and garments –arewellrecognized acrosstheworld
11. If implemented properly, Goods and Services Tax (GST) will boost tax
revenues
12. India has vast potential for tourism—be it medical, heritage or wildlife
The weaknesses are:
1. Loss of confidencein India’s abilitytofix the economic problemsand lack
of strong political leadership
2. Falling Indian rupee is reflecting lack of economic reforms since 2004,
though the Government lowered subsidies on petrol and diesel to some
extent
3. Current account deficit has gone out of hand putting pressure on rupee
4. Fiscal deficit is getting out of control as the government is unable to
control expenditure (huge subsidies on food, fuel and fertilisers) for about
six years
5. Consumer PriceInflationremainsvery high at around 8 to 10 per cent for
about five years, though wholesale price inflation is slightly on the mend
6. Largepricerise in food articlesis affecting thepoor people very adversely
7. Retrospective tax amendments—for example, Vodafone tax dispute
8. Indian bureaucrats are partially responsible for delayed actions on the
ground

4. 9. Investors’ areconcerned about controlson foreigncapitaloutflows. In the
last threemonths, foreigninvestorshavetakenout approximately$12 billion
from Indian debt/equity markets, though many emerging markets have
experienced flight of foreign capital.
10. India’s national income growth has slowed down due to high interest
rates, decline ininvestment cycle, lack of economic reformsand weakglobal
outlook
11. Indiancorporatesareburdenedwith high foreignaswellasdomestic debt
12. Manufacturing sector is down due to: mining bans, delays in
environmental clearances, land acquisition problems, social unrest and
others—thecentralgovernment is unable to addressthese problems despite
tall and hollow talks
13. There is massive skills deficit across industries
14. The central government is unable to push economic reforms as it is
drowned incorruptionscandalsinthelast threetofour years. Unfortunately,
corruption has permeated the entire social fabric.
15. The micro challenges for India are: poor healthcare, lack of quality and
basic education, malnutrition, hunger, poverty and illiteracy
16. Hard infrastructure (roads, ports, power, broadband, etc) is very weak
and energy securityis poor. The present government has fully failed on this
front.
17. Low productivityisimpeding farm output and the government has done
precious little except raising procurement prices for food grains
18. Focus of the Congress (I)-led UPA Government on vote-catchingwelfare
schemes ignoring the ills of the economy completely
19. The Indian Parliament is interested only in uproars, walkouts, and
logjams
To Sum Up:
India is facing challenges with high fiscal and current account deficits, lack
of strong political leadership, falling rupee, high inflation, slowdown in

5. portfolio inflows—which are overwhelming India’s strengths. Let us hope
that good monsoon will bring cheer to rural economy and the political
leadership will steer the economy on the right course with sound fiscal and
monetary policies aimed at pushing India on the next wave of growth. May
be, the 2014 elections will bring some clarity on this.