Missing the real achievements

Source: The post is based on the article “Missing the real achievements” published in Business Standard on 22^nd July 2023.

Syllabus: GS 3 – Indian Economy – Growth & Development

Relevance: About India’s economic scenario and challenges with it

News: The article explains India’s macroeconomic achievements and challenges associated with it.

What are the macroeconomic achievements made by India?

Wholesale and consumer price inflation rates in India have fallen significantly.

The WPI rate has decreased from an average of 9% in the 1970s to around 4% in the last decade. The CPI has also decreased, going from 7.5 percent to less than 6 percent in the last decade.

From 1992 to 2002, the overall balance of payments surplus was $52 billion. It has risen to $354 billion in the most recent decade (2012-22). This has resulted in the elimination of dollar scarcity.

Moreover, the reliance on aid and foreign borrowings has also decreased substantially.

Although the merchandise trade deficit has grown in comparison to earlier decades, the expanding services export surplus has mostly neutralised it.

Further, growing foreign investment in the last three decades has also contributed to the positive economic shift. As a result of this, India’s currency has become more stable.

Although the rupee has continued to depreciate against the dollar, the rate of decline has slowed over time.

However, despite these achievements, India still faces challenges in becoming the fastest-growing large economy.

What are the challenges with India in becoming the fastest-growing economy?

First, in 2022, Saudi Arabia and Vietnam surpassed India’s growth rate, and the Philippines outperformed in the first quarter of 2023. India is likewise not a beneficiary of the “China Plus One” scenario. It’s Vietnam.

Second, India is at a disadvantage compared to nations like Thailand, Malaysia, and Indonesia because of its lack of economic integration with East Asian economies and its exclusion from the Regional Comprehensive Economic Partnership (RCEP).

Third, Vietnam is currently on par with China in terms of exports to the West when it comes to supplying apparel to the US.

Hence, India still belongs to the group of developing players despite having a sizable market.

What can be the way ahead?

The structural improvements experienced in India over the decades have resulted in a more stable economy and currency, contributing to political stability as well.

However, despite this, India has not achieved a rapid-growth trajectory comparable to that of several East Asian economies since the mid-twentieth century. Therefore, there is a need for introspection to address this disparity.