• UGI USER
  • Feb 14, 2024
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THE STATE OF THE INDIAN ECONOMY TODAY

Syllabus:

GS 3 :

  • Indian Economy and issues relating to Planning, Mobilization of Resources, Growth, Development and Employment.
  • Inclusive Growth and issues arising from it.

Focus:

  • The current state of the Indian economy necessitates an assessment grounded in factual data and statistical analysis.
  • This examination relies on recent findings from the National Statistical Office, shedding light on the economic trajectory during the current government’s tenure.
About National Statistical Office (NSO)

·    The NSO, operating under the Ministry of Statistics and Programme Implementation, oversees the planned development of the statistical system in India.

·    It establishes and maintains standards and norms in statistics, covering concepts, definitions, data collection methodology, processing, and dissemination of results.

·    Comprising the Central Statistical Office (CSO), the Computer center, and the National Sample Survey Office (NSSO), the NSO is the primary agency responsible for statistical activities in the country.

Functions of the NSO:

·    Releases the Index of Industrial Production (IIP) monthly, providing “quick estimates” for industrial output.

·    Conducts the Annual Survey of Industries (ASI) to gather data on industrial enterprises.

·    Offers statistical information to analyze changes in the growth, composition, and structure of the organized manufacturing sector, aiding in assessment and evaluation.

Analyzing the Data:

  • Declining GDP Growth Rate: 
  • India’s GDP growth rate has witnessed a continuous decline since 2016-17, dropping below 3.5% in the fourth quarter of 2019-20.
  • This decline, from a 7% growth rate to 3.5%, has not been officially acknowledged by the government.
  • Return to “Hindu Rate of Growth”:
  • Since 2020, the current government’s development model has mirrored the historically low “Hindu rate of growth” seen during the socialist period of 1950-77.
  • Past Growth under Rao and Singh:
  • During P.V. Narasimha Rao and Manmohan Singh’s tenures, India experienced significant GDP growth, departing from the socialist path and achieving rates of 6%-8% annually between 1991-96 and 2004-2014.

Concerns and Misleading Claims

  • Decline in GDP growth rates : The current government’s tenure has been marked by a continuous decline in GDP growth rates since 2016, with ambitious yet unsubstantiated claims of economic growth.
  • No coherent policy : Despite claims of India becoming a $5 trillion economy by 2024, no coherent policy or debate on achieving this goal has been presented.
  • Unrealistic Projections: Despite a deteriorating economic scenario, the government has persistently propagated optimistic forecasts, including the ambitious target of achieving a $5 trillion economy by 2024, without presenting a viable roadmap to attain this goal.
  • Misleading Post-COVID Recovery Figures:
  • While media reports tout a GDP growth rate of 6%+, these figures mask the reality of including post-pandemic recovery in the calculations.
  • A closer examination reveals that the actual growth rate between 2019-20 and 2022-23 averages less than 4% annually.
Government Initiatives for Enhancing GDP Growth

1.     Pradhan Mantri Jan-Dhan Yojana (PMJDY):

A financial inclusion program providing access to banking services, encouraging savings, remittances, and insurance, thereby fostering economic growth.

2.      Pradhan Mantri Mudra Yojana (PMMY):

Facilitates loans up to Rs. 10 lakh to non-corporate, small business units, promoting entrepreneurship and economic activities in the informal sector.

3.      Pradhan Mantri Kisan Samman Nidhi (PM-KISAN):

Direct income support scheme for farmers, providing Rs. 6,000 annually in three equal installments, aiming to boost agricultural productivity and income.

4.     Atmanirbhar Bharat Abhiyan:

A comprehensive self-reliance initiative comprising multiple schemes across sectors such as agriculture, MSMEs, infrastructure, and health, promoting domestic manufacturing and reducing dependency.

5.     Make in India:

A flagship initiative to attract foreign investment and promote domestic manufacturing across various sectors, fostering job creation, skill development, and economic growth.

6.     Startup India:

Promotes entrepreneurship and innovation by providing funding support, tax benefits, and incubation facilities to startups, driving economic growth through technology and innovation.

7.      Digital India:

Aims to transform India into a digitally empowered society and knowledge economy by promoting digital infrastructure, e-governance, and digital literacy, fostering economic inclusivity and efficiency.

8.     Skill India:

Enhances employability and productivity by providing skill training to youth across sectors, aligning skill development with industry needs, and creating a skilled workforce to drive economic growth.

9.      Pradhan Mantri Awas Yojana (PMAY):

Provides affordable housing to all urban and rural households by 2022, stimulating demand in the construction sector and generating employment opportunities.

10.  Swachh Bharat Abhiyan:

Aims to achieve universal sanitation coverage and cleanliness, promoting health and hygiene, enhancing productivity, and attracting investment by creating a conducive environment.

11.  National Rural Employment Guarantee Act (NREGA):

Provides 100 days of guaranteed wage employment in rural areas, boosting rural income and consumption, and strengthening the rural economy.

12.  Goods and Services Tax (GST):

A unified indirect tax system simplifying tax compliance, reducing tax evasion, and promoting ease of doing business, contributing to economic growth and formalization of the economy.

Way Forward / Policy Recommendations:

  • Transparent Resource Mobilization: In light of subdued demand and excess supply, the government should focus on indirect taxation and currency circulation to stimulate demand among non-affluent citizens.
  • Reforms for Middle-Class and SMEs: Essential reforms include offering higher interest rates on middle-class savings and capping loan interest rates for small and medium enterprises (SMEs) at 6%, aiming to bolster non-inflationary demand.
  • Reassessing “Modinomics”: The current economic strategy lacks coherence and tangible outcomes. Urgent reforms are imperative to establish clearly defined objectives and a structured approach towards achieving them, coupled with transparent financing mechanisms.
  • Emulating Market-based Systems: Learning from China’s transition under Deng Xiaoping, India should adopt a market-based economic model while ensuring affirmative action, social security, and safety nets to promote inclusivity and transparency.
  • Balancing Deregulation with Governance: Deregulation should not entail the abandonment of government intervention in critical areas such as social security and market regulation. Strengthening democratic institutions is crucial to prevent societal unrest and autocratic tendencies akin to post-Soviet Russia.

Conclusion:

Addressing the current economic challenges requires a comprehensive overhaul of existing policies, prioritizing transparency, accountability, and inclusive growth. By embracing pragmatic reforms and learning from global precedents, India can navigate towards sustainable economic resurgence and societal well-being.

 

Source:

https://www.google.com/amp/s/www.thehindu.com/opinion/op-ed/the-state-of-the-indian-economy-today/article67838620.ece/amp/

Mains Practice Question:

Discuss the challenges and policy recommendations necessary to stimulate economic growth and ensure sustainable development in India.