India’s Economic Growth Story

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    In News 

    Recently ,the  story of India’s growth  in terms of its economy  has been highlighted .

    Background

    • After sluggish growth for about four decades after Independence, India’s growth picked up in the early 1990s, following the reform of 1991-93. 
    • From 2005 to 2008, it was acclaimed globally for being on top of most charts.

    Growth status of India 

    • India is primarily a domestic demand-driven economy, with consumption and investments contributing 70% to the country’s economic activity
      • With the economic scenario improving on recovering from the COVID-19 pandemic shock, several investments and developments have been made across various sectors of the economy.
    • In 2021-22, its GDP growth was 8.7%, which was among the highest in the world. 

    Emerging Issues 

    • The Indian rupee has been doing very poorly (especially in comparison to the stated target of our political leaders to strengthen it) 
      • Virtually all currencies are losing out against the U.S. dollar, and inflation right now is a global phenomenon.
    • India is doing poorly is in employment generation
      •  India’s unemployment rate is high. 
    • In 2020-21, India’s growth was minus 6.6%, which placed the country in the bottom half of the global growth chart.
    •  For 2022-23, the International Monetary Fund has cut India’s growth forecast to 6.1%. 
    • India grew slower than a majority of nations during the COVID-19 pandemic. 
    • The slowdown began much before the COVID-19 pandemic.

    Reasons 

    • There have been good and bad moves at India’s policy interventions over the last six or seven years.
      • It was good to see the new Insolvency and Bankruptcy Code the nation adopted in 2016 because India  needed to make it easier for bankrupt firms to close down and move on.
        • On the other hand, the demonetisation of 2016 was a big mistake. 
    • For long years, India used to have a low investment rate and the falling investment rate is adversely impacting growth and hurting job creation.
      •  Trust is a major driver of investment. As the level of trust erodes in a society, investment tends to fall.

    Governments Initiatives 

    • Over the years, the Indian government has introduced many initiatives to strengthen the nation’s economy. 
    • Many of the government’s flagship programmes, including Make in India, Start-up India, Digital India, the Smart City Mission and the Atal Mission for Rejuvenation and Urban Transformation, are aimed at creating immense opportunities in India.
    • The Union Budget of 2022-23 had four priorities: PM GatiShakti, Inclusive Development, Productivity Enhancement and Investment, and Financing of Investment.
    • In July 2022, the Reserve Bank of India (RBI) approved international trade settlements in Indian rupees (INR) in order to promote the growth of global trade with emphasis on exports from India and to support the increasing interest of the global trading community.

    Conclusion and Way ahead 

    • Given India’s strong fundamentals and abundance of talent, there is no reason why such a vast expanse of the economy should be languishing, with so many people witnessing a contraction in their incomes. 
    • We do need to shift the policy focus from a few rich corporations to the larger segments of population — small businesses, farmers and ordinary labourers. 
      • There is a need for fiscal policy interventions to transfer income from the super-rich to these segments. 
    • Finally, even though a divided society is easier to rule, we have to pull back from this and create an ethos of inclusion and trust, the erosion of which is slowing down investment and adversely impacting job creation and growth.
    • Recent government initiatives to boost revenue will aid in containing the rise in the current account deficit and ensure that any potential fiscal slippage is adequately contained. 
    • According to the World Bank, India must continue to prioritise lowering inequality while also launching growth-oriented policies to boost the economy. 

     

    Mains Practise Question 

    [Q] Do you agree that the Indian Economy grew slower than a majority of nations during the COVID-19 pandemic. Give reasons in support of your answer.