RSTV SUMMARY 10th APRIL

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By admin April 10, 2019 11:43

RSTV SUMMARY 10th APRIL

The Big Picture: Indian Economy Going Strong

Indian economy is going strong in the times when major economies around the world are seeing the slow growth rate

The International Monetary Fund (IMF) pegged India’s economic growth forecasts for India to 7.3 per cent for FY 2020 and 7.5 per cent for the next fiscal. The IMF report also cited continued recovery of investment and robust consumption amid a more expansionary stance of monetary policy and some expected impetus from fiscal policy.

It, however, said that in the near term, continued fiscal consolidation is needed to bring down India’s elevated public debt. This should be supported by strengthening goods and services tax compliance and further reducing subsidies.

The IMF also commended the government for taking steps to strengthen financial sector balance sheets through the accelerated resolution of non-performing assets (NPAs) under a simplified bankruptcy framework.

The report though argued that global growth which peaked at close to 4 per cent in 2017 dropped to 3.6 per cent in 2018, and is projected to fall further to 3.3 per cent in 2019.

Does this report mean economic stability and an indication of solid growth in the future?

What does the report mean?

  • The report says the economy is doing extremely well and is one of the fastest growing economies.
  • The reforms like GST and demonetization has enabled the economy to grow in a good way.
  • The insolvency and bankruptcy code has been able to resolve many NPA problems in the country.
  • The government has also been able to maintain fiscal deficit at 3.4% and the report has asked it to be brought down to 3% by reducing on subsidies and other public expenditures and debts.
  • The IMF also clearly indicates that the country should bring in more investments and more consumption if it has to grow.
  • RBI has already reduced the repo rate in the last two monetary policies and asked banks to pass on the benefits to consumers so that there is a greater industry offtake.
  • So impetus has been provided by fiscal measures in terms of investment in infrastructure; governance, which made it easier for bringing about industry offtakes and resolution of banks, which brought more credit to the industry.

What are the contributing factors in the growth of the economy?

  • The Indian economy has been doing well for the last several years.
  • The world anticipated to grow at 3.3% in future is growing at a faster pace than it has averaged during the last decade.
  • One of the largest contributors to the growth has been the United States with its economy growing at 4% which was not the case earlier.
  • The slowdown has been witnessed across Europe and China.
  • The growth of emerging markets is also slowing down which is expected to be 4.4%.
  • Indian economy had so far been driven by consumption. As the IMF report points out, the slowdown in consumption, both public and private, caused the economy to slow down in Q3.
  • The macroeconomic factors of the Indian economy have been sound caused by low inflation and low crude oil prices globally.
  • IMF is the third institution to bring down India’s growth rate after the World Bank and ADB.
  • It has also clearly pointed out that India has projected a growth rate expecting greater investment, consumption, financial and structural reforms.
  • Besides lowering the fiscal deficit by reducing public expenditure, the IMF has also asked India to address the hire and fire policy in the labour market to achieve the 7.5% growth anticipated by India.

Supporting factors for the Indian economy

  • Low inflation
  • Foreign exchange reserves of $390 billion
  • Increase in credit ratings in the market
  • Ease of doing business ranking has increased to 77th rank
  • e-governance and digitalization is taking place
  • Financial inclusion which will impetus to the economy is also taking place at a faster pace which enables people to shift from informal segments to formal segments
  • PM Jan Dhan Yojana and GST have also supported the economy.

Challenges for the economy

  • Creating jobs for people
  • Taking care of farmers distress as a result of low outputs
  • Farm loan waivers are not a solution as it puts pressure on the already stressed banks.
  • The global factors are pulling down the growth rate in India as pointed out by the IMF.
  • Indian economy will be affected by the global slowdown in terms of consumption and investment. Protectionism will affect exports.

What should be done?

  • Land reforms
  • Labour reforms
  • Judicial reforms
  • Market reforms in the agricultural sector which should include policies related to import and export. Currently, the dip in prices is not in sync with import-export policies to increase the farmer’s revenue.
  • Financial sector reforms are required to resolve the NPA problem of banks which are a major drag on the economy. Banks have not been able to lend which has prevented capacity utilisation of many sectors.
  • More attention should be given to a sector-wise development of the services sector which is a major sector of the economy but has remained neglected.
  • Rural wages and rural credit should be improved as the largest workforce s in rural areas. Increase in rural wages would also lead to more consumption as there is limited scope for expansion in other sectors.
  • Increasing incomes of the people in different ways will increase consumption which in turn will increase investments as businesses will expand.
  • Administrative reforms should also be undertaken to enable doorstep delivery of services to people.

Read Also:- Daily PIB Summary

Read Also:- Daily The Hindu

admin
By admin April 10, 2019 11:43