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• In August 2011 the Planning Commission approved a growth target of 9 per cent for the 12th plan period beginning April 2012. Against the background of mounting global economic problems and clear signs of economic slowdown and political weakness in India, this seemed to be optimistic, at best, and unrealistic, at worst. With the rising probability of “double dip” recession and/or slow growth in the US and Europe for the next two or three years, it is hard to see how India can achieve a 9 per cent growth average over the next five years. Growth targets aside, the key development challenges for the medium term are fairly clear and are briefly outlined below.
• Compared to 2008, when the impact of the last global crisis hit India, the country today is in weaker shape to deal with a renewal of global economic recession. The combined fiscal deficit is running at almost twice the level it was at in 2007/8, the deficit on the current account of the balance of payments is more than double of what it was,
• With a 500 million plus labour force, expanding by 12 to 13 million each year, the potential of India's "demographic dividend" is often invoked. But for that potential to be fulfilled there has to be much faster creation of decent job opportunities and much greater “skilling” of the labour force, of whom the vast majority has low skills and little education. According to official data, a paltry 6 per cent of the country's labour force was employed in decent, organised sector jobs in 2008, with a third of these in the public sector, including governnment. The remainder, the overwhelming majority, toiled in casual, ill-paid and insecure jobs. Clearly, the critical priority is to increase good job opportunities through strong labour-intensive growth and improve the skill levels of the massive labour force.
• The expansion of job opportunities for low-skill labour has to come from both high gr­owth of output, especially in manufacturing, and removal of impediments and disincentives to employment. This includes reforming India's unusually onerous labour laws, which today protect a tiny minority in secure jobs at the cost of erecting massive disincentives for fresh employment.
• Until the government musters the political will to do this, the outlook for decent jobs for India's “youth bulge” will remain bleak. Indeed, the so-called demographic dividend could become a huge economic and social nightmare.
• At the same time, India has to do a great deal more to improve the quality of her numerically immense human resources. This requires major reforms in the provision of education and health, especially at primary and secondary levels. At present, in many states, much of the public school and health systems is dysfunctional, with schools without teachers and health clinics without medicines or nurses. The current emphasis on an entitlement approach (such as through the Right to Education Act) may get nowhere without systematic measures to improve efficiency, accountability and probity in the public systems of education and healthcare. Within healthcare, there has to be far greater emphasis on public health upgradation and other preventive measures relative to curative approaches to better health.
• With over half of India's labour force still in agriculture, though producing only about 15 per cent of national output, faster growth of this sector is crucial for alleviating poverty, containing inflation, ensuring food security and expanding the market for manufactures and services. Successive five year plans have aimed at sustaining 4 per cent growth but always fallen short.
• Yet, the example of some states, like Gujarat (where agriculture grew at 8 per cent over the past decade), indicate that acceleration of agricultural growth is very feasible. It does require sustained programmes of water conservation and management, a systematic improvement of extension services, an overhaul of rural electricity provision, strong support for non-food crops and livestock, upgradation of road networks and reform of marketing laws and systems. As in the case of education and health, the major responsibility lies with state governments.
• Energy development and conservation
• Rapid growth of the economy requires sustained expansion of energy supply and use. The era of cheap hydrocarbons seems to be over. The medium-term outlook on international prices of oil, gas and coal indicates a strong probability of high and rising prices. This means that India will have to rely on rapid development of her own resources of coal, oil and gas.
• For this to happen and to encourage the necessary conservation, the user prices of oil and gas products have to be aligned with prevailing international prices. This entails hard policy actions such as implementing the 2010 decision to decontrol diesel prices and bring about a phased reduction of the large subsidies on kerosene and LPG. It also requires greater opening of the coal sector to private sector development, subject to appropriate regulation for environmental safety. With high energy prices, massive subsidies for electricity cannot continue without jeopardising seriously the financial and operational viability of the system. They will need to be phased down.
• India must also pursue efficient approaches to energy conservation and development of nuclear, solar and non-conventional sources. There is much scope for energy conservation through setting standdards for buildings and appliances. Big savings in energy use can be achieved through a shift to higher proportion of freight transportaation through railways rather than roads. This entails an overhaul of railway pricing, which reduces fares for freight and raises those for passengers.
• Land, water and natural resources
• Land and natural resources (including spectrum) have been at the centre of recent scams and scandals, which have rocked the politics and economics of the country in recent times. At the heart of the problems have been archaic laws, excessive discretion available with governments to make allocations of these scarce resources and lack of transparency and accountability. Corruption and crony capitalism have flourished giving economic reforms a bad name when lack of reforms is the main problem in these areas. Clearly it is important to modernise the relevant laws and regulations, generally insist on competitive bidding processes in making allocations, pay due heed to environmental considerations and strive for as much transparency and accountability as feasible. These desiderata are important whether the allocations refer to mining rights, land or telecommunications spectrum. It is important to move quickly with the necessary reforms as land and natural resources are essential ingredients for the country's industrial and urban development.
• So also is water. And there is less and less of it each passing year in relation to need. The great bulk of water use is still in agriculture.
• Much can be gained through various conservation measures, such as watershed development, check dams, groundwater recharge schemes and new irrigation techniques. Conservation can also be enhanced through pricing, wherever feasible and appropriate. Like any other scarce resource, water use should be priced whenever possible. This is especially true in growing urban localities where water charges have stagnated for many years. Aside from conservation, this will help raise the resources to build and maintain new water supply systems.
• The urbanisation challenge
• In 20 years the proportion of India's population dwelling in cities and towns is expected to rise from 30 to 40 per cent, implying an additional 230-250 million urban residents This creates huge challlenges for expanding urban infrastructure including the hardware of roads, mass transit, electricity, water and sanitation and the software of schools, medical facilities, policing, workplaces and recreation facilities. Financing, building and maintaining these expensive facillities will require high quality planning, execution and, above all, governance. The last is perhaps the least developed in India, where urban governments have typically been weak and subordinate to state governments. In their own long-term interest, states will have to cede significantly more financial and governance authority to urban bodies. These, in turn, will need far more skilled personnel to manage complex urban systems. But it will all be necessary for India to enhance her competitiveness in manufacturing and services in the global economy.
• This brief summary gives a glimpse of the daunting challenges ahead. But if India's economic development is to maintain the momentum of 8-9 per cent growth over the decade ahead, the challenges will have to be met. Otherwise, we may have to reconcile to slower economic progress.

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