{"id":193109,"date":"2022-06-29T21:00:44","date_gmt":"2022-06-29T15:30:44","guid":{"rendered":"https:\/\/blog.forumias.com\/?p=193109"},"modified":"2022-06-29T21:00:44","modified_gmt":"2022-06-29T15:30:44","slug":"indias-economic-constraints-and-an-energy-holdback-to-be-eased","status":"publish","type":"post","link":"https:\/\/forumias.com\/blog\/indias-economic-constraints-and-an-energy-holdback-to-be-eased\/","title":{"rendered":"India\u2019s economic constraints and an energy holdback to be eased"},"content":{"rendered":"\n

News<\/strong>: The Indian economy is under pressure due to high global oil prices. In the current fiscal year<\/strong>, India may witness a balance of payments deficit<\/strong>. However, at present, the problem of deficit can be tackled with large buffer of foreign exchange reserves with the Indian central bank.<\/p>\n

What are the issues ahead?<\/strong><\/p>\n

1) High volatility in the global oil prices<\/strong>,<\/p>\n

2) Slower global economic growth<\/strong>,<\/p>\n

3) International investors<\/strong> showing uncertainty due to the ongoing monetary tightening by many central banks and<\/p>\n

4) Volatile geopolitical situation<\/strong><\/p>\n

What are the lessons in the ongoing episode of turmoil in the global market for crude oil? <\/strong><\/p>\n

India is structurally deficient<\/strong> in energy. So, it needs to generate foreign exchange<\/strong> from the rest of the world to pay for its energy imports<\/strong>. It can be done either through exports or capital inflows.<\/p>\n

In January 2019, Vijay Kelkar had pointed out that the growth strategy followed by any country depends on empirically identifying important structural constraints to growth. Then the policies should be designed to ease those constraints. India in the past identified following structural constraints.<\/p>\n

History of India\u2019s four earlier structural constraints addressed by the government<\/strong><\/p>\n

1) The savings constraint:\u00a0<\/strong>India faced the growth challenge as India had a very low savings rate in the years after independence, of around 9.5% of GDP. India undertook bank nationalization <\/strong>in 1969. Thereafter, India\u2019s savings rate went up by more than 5 percentage points within a decade.<\/p>\n

2) The food constraint:\u00a0<\/strong>India faced shortage of food in the 1950s and 1960s. We were dependent on food imports from the US. It risked India\u2019s independent foreign policy. Therefore, India steered the Green Revolution<\/strong> at the end of the 1960s. It helped India break the food constraint.<\/p>\n

3) The foreign exchange constraint:\u00a0<\/strong>India had \u2018scarce\u2019 \u2018foreign exchange\u2019. India was hit by periodic balance of payments crises <\/strong>till 1991. Thereafter, India opened up the economy in 1991. It broke India\u2019s foreign exchange constraint<\/strong>, both through greater trade<\/strong> with the world as well as capital inflows<\/strong> into the economy.<\/p>\n

4) The home market constraint:<\/strong>\u00a0Earlier, it was said in the 1970s, that India\u2019s domestic market was not big enough to absorb industrial goods<\/strong> that were being produced by local manufacturers. It was because of low average incomes<\/strong> as well as unequal distribution of income<\/strong>. The economic growth raised the income level, higher support prices<\/strong> were given to farm produce which built the rural market and the international market was also recognized after 1991.<\/p>\n

Way Forward<\/strong><\/p>\n

At present India is facing another structural problem of the energy constraint<\/strong>. Similar to above policy measures, the government can solve the issues through green transition <\/strong>because India is better endowed with sunshine and other renewable sources than crude oil.<\/p>\n

India needs to be part of emerging global supply chains<\/strong> for the provision of new forms of energy in the coming decade.<\/p>\n

Source<\/strong>: The post is based on an article \u201cIndia\u2019s economic constraints and an energy holdback to be eased\u201d<\/strong> published in the Live Mint<\/strong> on 29th<\/sup> June 2022<\/strong>.<\/p>\n","protected":false},"excerpt":{"rendered":"

News: The Indian economy is under pressure due to high global oil prices. In the current fiscal year, India may witness a balance of payments deficit. However, at present, the problem of deficit can be tackled with large buffer of foreign exchange reserves with the Indian central bank. What are the issues ahead? 1) High… Continue reading India\u2019s economic constraints and an energy holdback to be eased<\/span><\/a><\/p>\n","protected":false},"author":10320,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"jetpack_post_was_ever_published":false,"footnotes":""},"categories":[1230,9],"tags":[216,10501],"class_list":["post-193109","post","type-post","status-publish","format-standard","hentry","category-9-pm-daily-articles","category-public","tag-gs-paper-3","tag-live-mint","entry"],"jetpack_featured_media_url":"","views":"","jetpack_sharing_enabled":true,"_links":{"self":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts\/193109","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/users\/10320"}],"replies":[{"embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/comments?post=193109"}],"version-history":[{"count":0,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts\/193109\/revisions"}],"wp:attachment":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/media?parent=193109"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/categories?post=193109"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/tags?post=193109"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}