On the Positive Signs for Indian Economy – India is well on its way to becoming Viksit Bharat

Source: This post on the Positive Signs for Indian Economy has been created based on the article “India is well on its way to becoming Viksit Bharat” published in “Indian Express” on 9^th February 2024.

UPSC Syllabus Topic: GS Paper 3 Indian Economy – Indian Economy and issues relating to planning, mobilization of resources, growth, development and employment.

News: The article discusses the monetary and fiscal policies that point to a phase of steady growth and moderate inflation in the future for India.

A detailed article on Interim Budget 2024 can be read here.

According to the author, monetary and fiscal policies have put in place conditions for a phase of steady growth and moderate inflation. The Interim Budget has focused on infrastructure development, innovation and connectivity which will lead towards a Viksit Bharat.

What are India’s economic projections as per the Monetary Policy Committee (MPC)?

1) The forecast for GDP growth in 2024-25 has been kept at 7%.

2) The projection for Headline inflation has been reduced to 4.5%.

What are the development and regulatory policy changes announced by the MPC?

1) Information Sharing: RBI has extended the requirement of the Key Fact Statement (which includes information on interest rates and the financial commitment associated with a loan) to cover all retail and MSME loans and advances. This will empower customers to make informed decisions about their borrowing.

2) Technology Initiative for Payment Authentication: A “Framework for authentication of digital payment transactions” will be explored. Along with this, enhancing the robustness of the Aadhaar Enabled Payment System (AePS) will be undertaken. These initiatives will help in preventing digital frauds.

3) Adoption of CBCD: Changes proposed in the Central Bank Digital Currency could help people onboard into the CBDC architecture.

What are the positive signs for the Indian economy?

1) Rise in Capital Expenditure: As per the interim budget, the overall allocation for capital expenditure is equivalent to 5.6% of GDP and implies a growth of around 13%.

2) Lower Primary Deficit: It is expected to lower by 80 basis points to 1.5% of the GDP in FY25. In FY21 the primary deficit was more than 5% of the GDP.

3) Debt Reduction: Public debt as a percentage of the GDP has also reduced and is expected to decline by 90 basis points in FY25 from its level of 58.1% in FY24.

4) Reduction in Fiscal Deficit: If growth and inflation move along expected lines, the fiscal deficit will be lower than the 5.1% target.

What are the positive signs for the Rural economy?

1) Infrastructure Development: Significant improvements in physical (road/rail) infrastructure is ensuring seamless last mile connectivity. The integration of cities, urban centres and satellite nodes with far flung rural areas will have to be accounted for in calculating rural demand.

2) Rising Rural Wages: Median wages of rural labourers during FY14-FY23 (November) have shown a rising trend.

3) Lakhpati Didi Initiative: The target of increasing the lakhpati didi numbers through the 8.3 million plus self-help groups in the recent budget is also a positive sign for the rural economy.

Question for practice:

What are the monetary and fiscal policies that will help in achieving a phase of steady growth and moderate inflation in India?