Source: This post on the status of economic growth in India has been created based on the article “ Pratap Bhanu Mehta writes: India’s growth slowdown is a signal of declining confidence in government” published in The Indian Express on 14th January 2025.
UPSC Syllabus topic: GS Paper 3- Indian Economy
Context: The article critically examines the underlying causes and implications of India’s growth slowdown, framing it as a broader issue of declining confidence in the government. The article presents a detailed analysis of economic policies, governance shortcomings, and systemic inefficiencies, emphasizing how these factors are contributing to a weakening of India’s economic prospects and investor confidence.
Why is India’s growth slowdown significant?
- India’s growth forecast for FY25 has been revised downward to 6.4%, from 8.2%, marking the lowest growth projection since the pandemic.
- Despite being one of the faster-growing economies, this revision signals a deeper concern about the state of economic confidence.
Is the slowdown genuinely cyclical?
- Official statements attribute the slowdown to cyclical factors, but this term often lacks analytical rigor in Indian economic discourse.
- A genuine cyclical slowdown would have been anticipated. The drastic revision suggests that India has a weak analytical framework for understanding and predicting economic cycles.
How does the lack of data and planning impact confidence?
- Official bodies, including the finance ministry and the RBI, appear uncertain about the growth-inflation dynamics.
- This lack of clarity and foresight may contribute to a crisis of confidence in India’s economic framework, both domestically and internationally.
What role does government capital expenditure play in growth?
- Growth in recent years has been heavily dependent on government capital expenditure, which raises concerns about the sustainability of growth if private investment remains subdued.
- This strategy, while useful in the short term, fails to address systemic weaknesses in the economy.
What are the systemic weaknesses in the Indian economy?
- India suffers from a lack of real reforms and policy measures to strengthen the economic base.
- Mindless capital expenditure and schemes that do not tackle core issues only provide temporary relief rather than fostering long-term growth.
What is the broader implication of the slowdown?
- The crisis of confidence among investors in the Indian state is growing.
- While investors may not express these concerns openly due to fear or politeness, privately, they see this slowdown as indicative of systemic policy and governance failures.
