Disclaimer: The views expressed in this article are those of the author and do not necessarily reflect the views of the Economic Times – ET Edge Insights, its management, or its members


The scale and extent of disruptions caused by the Covid-19 pandemic is unprecedented. In the initial days, government efforts across the globe, focused on curbing the spread of the virus in order to save lives by freezing the economy. Since India’s lockdown was one of the harshest in the world, the economic shock that followed was also colossal. India’s GDP fell by more than 20%, making the nation second worst affected by the pandemic.

But as the country gears up to reboot the economy by starting afresh, it has an immense scope to address certain shortcomings that had previously hindered progress and growth. Presently India is best positioned to recalibrate the business ecosystem, revise the approach to growth and reconfigure the economy to enable faster and more sustainable growth.

A new PWC report, points out five key areas of hidden friction in the Indian economy that have been particularly exposed by the pandemic. The research suggests that if institutions and private players work together to remove these frictions through structural adjustment and embracing new opportunities in the span of next 2-3 years, optimum revival and growth can be achieved.

Economic concentration in urban areas

The mass exodus of migrant laborers from cities during the lockdown period revealed the degree of economic concentration in India’s urban and metropolitan centers. It highlights the lack of efforts to enhance production and consumption in semi-urban and rural regions. More balanced distribution of economic hubs in all regions of the country would largely speed up sustainable growth.

Lack of economic width

Economically flourishing districts of India are highly concentrated in certain regions. Northern, western and southern areas of the country are economically more advanced while central and eastern India lag behind. The pattern was also visible in the reverse immigration of workers who were seen traveling from south, west and north states to central and eastern parts of India. Moreover, development of global supply chains has been restricted to India’s coastal cities and lack adequate integration in the country’s interiors.

Lack of economic height

India’s export industry doesn’t exploit the full potential present in the country. Export of Indian goods and services are constrained by infrastructure and narrow business mindset that are mostly focused on exporting from urban and metro centers, finally hindering growth. Further, the huge NRI population of the country widespread around the world, is not sufficiently engaged and exploited to the fullest.

India’s digital divide

The pandemic made it very easy to expose India’s digital divide. Although the rate of digital adoption in India is higher than most countries of the world, there is huge room for improvement. Since the next normal is expected to be largely digital and tech driven, India must increase its digital penetration to ensure rapid economic growth.

Dominance of the informal economy

It is broadly said that about 90% of the Indian economy is informal in nature. Sustainable economic progression is hard to achieve without formalization. The informal nature of India’s economy became more pronounced when the unemployment fugures started rocketing as soon as the pandemic hit the sub-continent.

All these obstacles have held back the Indian economy from reaching its true potential, but the crisis helped in bringing them to limelight. It is now evident that these problems are not meagre and must be addressed adequately so that the Indian economy can recover faster and reach its full potential in the coming years.

Disclaimer: The views expressed in this article are those of the author and do not necessarily reflect the views of the Economic Times – ET Edge Insights, its management, or its members

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