India’s economic outlook and strategies

Source: The post India’s economic outlook and strategies has been created, based on the article “Unlocking India’s decadal growth” published in “Business standard” on 30th May 2024.

UPSC Syllabus Topic: GS Paper 3– growth and development

Context: The article discusses India’s economic outlook and strategies. It highlights the importance of reforms, investments, and policy changes needed to maintain growth, address unemployment, and improve infrastructure. It emphasizes coordination between government levels and tapping into global markets to sustain long-term economic development.

For detailed information on India’s growth surprise read this article here

How is India’s current economic environment?

1. The fiscal year 2024 (FY24) is expected to see a growth rate close to 8%, with the Reserve Bank of India forecasting a 7% growth for FY25.
2. Fiscal discipline by the government and a responsive monetary policy are boosting investor confidence in India’s economy.
3. Consumer demand is strengthening, as indicated by Q4FY24 results showing improving rural demand.
4. Financial metrics like bank credit to MSMEs growing at 20.1% year-on-year as of March 2024 highlight the dynamic economic activity and strong domestic consumption.

What challenges and opportunities does India face?

Challenges:

1. Sustaining over 7% growth annually is difficult and requires multiple enablers like effective reforms and resource allocation.
2. Unemployment, particularly among youth, is exacerbated by technological advancements. Urban employment data shows only 47.4% salaried or regular wage positions, indicating a need for better job quality.
3. Small businesses need enhanced support such as easier credit access and government procurement opportunities. The last economic census was in 2013, pointing to outdated data that hamper effective policymaking.
4. The need for significant investment to achieve the net-zero carbon goal by 2070, with a critical demand for global capital.

Opportunities:

1. Private Sector Investment: Expected to rise due to lower borrowing costs and deleveraged company balance sheets.
2. Export Growth: Aiming for $1 trillion in merchandise exports by 2030, necessitating enhanced market access and new trade agreements.
3. Infrastructure Development: Efficient transport and logistics are critical, with the government focusing on projects like Gati Shakti and Bharatmala to support the expected high volume of exports and imports.

Way forward

To sustain economic growth, India must enhance infrastructure, support MSMEs, and improve job quality. Achieving the $1 trillion export target requires expanding global market access and new trade agreements. Also, better coordination between the central, state, and local governments is essential for efficient reform implementation and economic progress.

Question for practice:

What are the key factors influencing India’s current economic outlook and what challenges and opportunities does the country face moving forward?