Issue 1: Inflation (Mehengai or Price Rise)
What is it?
Inflation is the rate at which the prices of general goods and services increase over a period of time. In simple words, your money buys less today than it did yesterday.
Why is it a problem for India?
- It hurts the purchasing power of the common person, especially the poor.
- The cost of basic necessities like food, fuel, and transport goes up.
- It erodes the value of savings. Money kept in the bank earns interest, but if inflation is higher than the interest rate, the real value of your savings decreases.
- High inflation creates uncertainty in the economy, making it difficult for businesses to plan long-term investments.
Example
Imagine you could buy a liter of milk for ₹50 last year. If the price is ₹55 this year, the inflation for milk is 10%. Your ₹50 can no longer buy a full liter of milk.
Key Terms to Remember
- Consumer Price Index (CPI): This is the most common measure of inflation, tracking the prices of a basket of goods and services that households consume.
- Repo Rate: The interest rate at which the RBI lends money to commercial banks. The RBI often increases the repo rate to control high inflation.
Issue 2: Unemployment (Berozgari)
What is it?
Unemployment is a situation where a person who is actively searching for a job is unable to find work.
Why is it a problem for India?
- India has a huge young population (demographic dividend). If we cannot provide them with jobs, this advantage turns into a challenge.
- It leads to a loss of potential output for the country. Skilled people sitting idle is a waste of human resources.
- It can lead to poverty, social unrest, and crime.
- A key issue in India is Disguised Unemployment, especially in agriculture, where more people work on a farm than are actually needed.
Example
In a family of five working on a small farm that only requires three people to operate, the two extra people are considered disguisedly unemployed.
Issue 3: Fiscal Deficit
What is it?
Fiscal Deficit is the difference between the government’s total expenditure and its total revenue (excluding borrowings). In simple terms, it’s the amount of money the government has to borrow each year to meet its expenses.
Why is it a problem for India?
- It increases the national debt.
- A large portion of the government’s income goes into paying interest on past loans, leaving less money for development projects like roads, hospitals, and schools.
- Heavy government borrowing can sometimes lead to higher inflation.
Simple Analogy
Imagine your monthly expenses are ₹30,000 but your salary is only ₹25,000. The ₹5,000 you have to borrow every month is your personal fiscal deficit.
Issue 4: Infrastructure Deficit
What is it?
Infrastructure Deficit refers to the gap between the country’s need for basic physical systems (like roads, power, ports) and what is actually available.
Why is it a problem for India?
- Increases Logistics Costs: Poor roads and congested ports make it slow and expensive to transport goods, making our products less competitive.
- Hinders Manufacturing: Unreliable power supply disrupts factory production.
- Slows Down Growth: It makes it difficult to attract foreign investment and slows down overall economic activity.
Example
A factory produces goods but cannot ship them on time because the roads to the port are bad and the port itself is too congested. This delay increases costs and can lead to loss of business.
Issue 5: Current Account Deficit (CAD)
What is it?
The Current Account Deficit (CAD) occurs when the total value of a country’s imports of goods and services is greater than the total value of its exports. It means the country is spending more foreign currency than it is earning.
Why is it a problem for India?
- It makes the Indian Rupee weaker against foreign currencies like the US Dollar.
- It shows that the country is dependent on foreign capital (like FDI and FPI) to finance its spending.
- A high CAD can be risky. If foreign investors suddenly pull their money out, it can create a major financial crisis.
Simple Analogy
Imagine your total monthly spending on foreign goods (like a smartphone from China or petrol, which is imported) is ₹10,000, but your total earnings from selling things abroad are only ₹8,000. You have a personal CAD of ₹2,000.
Summary Table for Revision
| Issue | Simple Meaning | Main Impact |
| Inflation | Rise in prices; money buys less. | Reduces purchasing power, hurts the poor. |
| Unemployment | People willing to work can’t find jobs. | Waste of human resources, can lead to poverty. |
| Fiscal Deficit | Government spending > Government income. | Increases national debt, less money for development. |
| Infrastructure Deficit | Lack of good roads, power, ports, etc. | Slows economic growth, makes business expensive. |
| CAD | Imports > Exports. | Weakens the Rupee, creates dependency on foreign funds. |