Miles to Go: Indian Economy

Context:

India’s economy is firmly out of the throes of the pandemic blues, the higher-than-expected 7.2% GDP growth. 

• As per, Chief Economic Advisor (CEA) V. Anantha Nageswaran, India could now grow for a longer period of seven to 15 years as China did between 1979 and 2008 without “running into overheating problems”.

What is GDP & GVA?

• Gross Domestic Product (GDP) is the total monetary or market value of all the finished goods and services produced within a country’s borders in a specific time period.
• Gross Value Added (GVA) measures the value of goods and services produced in an economy, after deducting the cost of inputs and raw materials used in the production process.

The Statistics:

• GVA growth in the mining sector was 4.3 percent in the fourth quarter compared to 2.3 per cent in the same quarter of the previous fiscal.
• The construction sector grew 10.4 per cent in the March quarter, up from 4.9 per cent in the corresponding period of 2021-22. 
• The agriculture sector growth accelerated to 5.5 percent from 4.1 percent.
• However, there was a decline in both exports and imports, clouding the economic outlook.
• Barring any monsoon-related risks or geopolitical uncertainties, India’s economy may surpass the initial estimate of 6.5 per cent growth for the current fiscal year (April 2023 to March 2024).
• Private consumption, which accounts for nearly 60% of the economy, grew 2.8% year-on-year compared with a revised 2.2% in the previous quarter, while capital formation, an indicator of investment, rose 8.9% from a downwardly revised 8%.
• Federal government spending, constituting about 10% of GDP, rose 2.3% year-on-year in the latest quarter, compared with a revised 0.6% contraction in the previous quarter.

Reasons of such Positive Result:

• Strong momentum
• Better macro fundamentals with inflation
• Trade deficits easing 
• Cleaner bank and corporate balance sheets bolstered by reforms such as Goods and Services Tax (GST)
• Digitisation that is spurring formalization

Concerns need to be Checked:

• Slowing Exports and Rising Imports
• Unpredictable Weather which impacts agricultural sector
• Rising Inflation mainly because of high energy prices
• Uneven recovery and sectoral disparities.
• Pre-pandemic economic slowdown.

Steps need to be Taken:

• Private investment and job creation: The government needs to focus on reviving private investment to stimulate job creation, which is crucial for sustainable demand growth and a virtuous economic cycle.
• Investor confidence: To attract investments, the government should address issues such as high import tariffs, complex regulations like the ‘angel tax,’ and improve services like online company registration to instill investor confidence.
• Streamlined regulations: The government should avoid unnecessary tinkering with economic policies and create a conducive environment for value and job creators, facilitating a smooth and hurdle-free passage for businesses.
• Encashing supply chain opportunities: India should align its intent to become a preferred alternative to China in global supply chains with effective actions, including policy reforms and infrastructure development, to attract investment and benefit from the China-plus-one strategy.

Conclusion:

Before the economic engine can be truly on ‘auto pilot’ mode, the government must desist from unnecessary tinkering with its calibrations and create conducive conditions for a smooth and swift, hurdle-free passage for value and job creators.

News Source: The Hindu

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