Subject: Economy

India's journey with capitalistic economic reforms since 1991 presents a complex narrative of growth and inequality, making it crucial to evaluate capitalism's role in achieving inclusive development.

Positive Aspects of Capitalism in India

• Economic Growth and FDI: India witnessed substantial foreign investments with FDI inflows reaching $55.6 billion in April-November 2024-25, showing a 17.9% year-on-year increase, primarily benefiting services and technology sectors.

• Poverty Reduction: Capitalistic policies contributed to significant poverty alleviation with extreme poverty dropping from 12.2% to below 1% between 2011-2024, demonstrating capitalism's potential for wealth creation.

• Sectoral Development: Market-driven growth has strengthened various sectors, with services (19.1%), computer software (14.1%), and non-conventional energy (7%) receiving substantial FDI, creating employment opportunities.

Challenges and Limitations

• Income Inequality: India's Gini coefficient of 0.410 indicates persistent inequality despite economic growth, highlighting capitalism's tendency to concentrate wealth.

• Regional Disparities: Market forces often favor developed regions, leading to uneven development between urban and rural areas, requiring state intervention.

• Social Security Gaps: Pure capitalism may neglect social welfare, necessitating government intervention through social sector spending.

Balanced Approach for Inclusive Growth

• Social Sector Focus: Government's commitment shown through increased social sector expenditure from 23.3% to 26.2% of total expenditure between FY21-25.

• Healthcare and Education: Substantial investments with health expenditure growing at 18% CAGR and education expenditure at 12% CAGR from FY21 to FY25BE demonstrate a balanced approach.

• Mixed Economy Model: Combining market efficiency with social welfare through public-private partnerships and targeted interventions ensures inclusive growth.

A nuanced adoption of capitalism, balanced with strong social welfare measures and regulatory frameworks, is essential for India's inclusive growth. The success lies in harnessing capitalism's efficiency while ensuring equitable distribution through initiatives like Digital India, Make in India, and Pradhan Mantri Jan Dhan Yojana, creating a more inclusive economic ecosystem.