Is the economy back on track?

Is the economy back on track?

Context

Disturbances on account of demonetisation and GST were purely short term

Positive indications

• Employment-generating sectors like construction, the worst hit by demonetisation, have already started reviving — demand is picking up because of falling prices and this is obviously due to minimum exposure to black money
• There are indications that the government is realising the need to move towards the ideal GST by addressing the glitches experienced at present
• With the revival of India’s major markets such as the U.S., Eurozone and Japan since September 2017, exports have started picking up, accounting for about 15% of the GDP.

Fixing the rural economy

• No direct access to the market: Farmers don’t get the benefits of market prices for agricultural produce or rise in minimum support prices (MSP), they are deprived as they do not have direct access to the market.
• Selling at a competitive price: Farmers should be enabled to play their role as an effective supply force in the market and be in a position to sell their produce at a competitive price

Effective Solution: Building infrastructure support for agriculture sector

Three major challenges

• Federal Reserve’s approach: It is reported that the Federal Reserve is in for three hikes in the next one year
  • Might weaken Indian currency: Withdrawal by foreign institutional investors in response to federal hikes may weaken the Indian currency and end up in a higher import bill, especially on the crude oil front, if exports do not pick up
• Rising crude oil prices
• Move towards protectionism by India’s major export market, the U.S.