Status of economic growth in India
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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? 

  1. India’s growth forecast for FY25 has been revised downward to 6.4%, from 8.2%, marking the lowest growth projection since the pandemic. 
  2. 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? 

  1. Official statements attribute the slowdown to cyclical factors, but this term often lacks analytical rigor in Indian economic discourse. 
  2. 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? 

  1. Official bodies, including the finance ministry and the RBI, appear uncertain about the growth-inflation dynamics. 
  2. 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? 

  1. 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. 
  2. 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? 

  1. India suffers from a lack of real reforms and policy measures to strengthen the economic base. 
  2. 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? 

  1. The crisis of confidence among investors in the Indian state is growing. 
  2. 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. 

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