The new government in India needs to focus on Indian economy

Source: The post the new government in India needs to focus on has been created, based on the article “Five things the next government needs to focus on” published in “Indian express” on 16th May 2024.

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

Context: The article discusses how the Indian economy grew well for three years but faced challenges due to the pandemic. It highlights areas for improvement like private investment, household consumption, taxes, job creation, agriculture, and increasing exports. The new government in India needs to focus on Indian economy

How has the Indian economy performed recently?

The Indian economy grew impressively by over 7% annually for three years, outpacing other major economies during the same period.

However, growth faced setbacks due to the pandemic. From 2014-2019, the economy expanded by Rs 41.9 lakh crore in real GDP terms.

In contrast, from 2019-2024, amidst COVID-19 disruptions, it added only Rs 33 lakh crore.

What are the areas that the new government in India needs to focus on?

Reviving Private Investment:

The government has been proactive with capital expenditures, particularly in infrastructure, boosting sectors like steel and cement.

However, private sector investment remains low due to insufficient demand. Expansion of the PLI scheme, particularly in electronics and green energy sectors, and introducing incentives such as investment allowances could help stimulate private investment.

Rethinking Taxes:

Reconsidering tax structures is vital for boosting economic activity. Lowering direct tax rates and rationalizing GST slabs can significantly increase the disposable income of individuals, promoting greater household savings and spending.

Boosting Household Consumption:

Consumption patterns have been volatile, with a temporary boost during the pandemic but generally suppressed due to high inflation and surplus capacity.

Reducing direct tax rates and rationalizing GST slabs could increase disposable income, thereby fostering greater consumer spending.

Enhancing Employment Opportunities:

Employment growth is crucial and can be supported by filling government vacancies and improving private sector job creation through stimulated economic activities.

Reforming Agricultural Policies:

Revisiting controversial farm laws and promoting discussions with stakeholders could lead to more acceptable agricultural policies.

Enhancing government involvement in agriculture and standardizing procedures for crop procurement and distribution can stabilize market prices.

Expanding Global Market Presence:

Entering more free trade agreements and improving merchandise exports, in addition to the already successful IT services exports, could position India more strongly in global supply chains.

Fiscal Responsibility:

Aiming to reduce the fiscal deficit to 4.5% of GDP by 2025-26 with a longer-term goal of reaching 3%, requiring careful financial management and policy adjustments.

Question for practice:

Examine what areas the new government in India needs to focus on for improving the economy.