{"id":52256,"date":"2019-09-17T19:00:00","date_gmt":"2019-09-17T13:30:00","guid":{"rendered":"https:\/\/blogadmin.forumias.com\/?p=52256"},"modified":"2019-09-17T16:56:18","modified_gmt":"2019-09-17T11:26:18","slug":"7-pm-the-slow-climb-to-the-trillion-economy-peak-17th-september-2019","status":"publish","type":"post","link":"https:\/\/forumias.com\/blog\/7-pm-the-slow-climb-to-the-trillion-economy-peak-17th-september-2019\/","title":{"rendered":"7 PM | The slow climb to the trillion economy peak | 17th September, 2019"},"content":{"rendered":"\n<p><strong>Context:\n<\/strong>To\nbe a $5 trillion economy, the real reasons of economic slowdown needs to be\naddressed.<\/p>\n\n\n\n<p><strong>More in News:<\/strong><\/p>\n\n\n\n<ul class=\"wp-block-list\"><li>On Independence Day, the Prime Minister expressed confidence that India would be a $5-trillion economy in 2024.<\/li><li>The latest annual report of the RBI for the fiscal year 2018-19 (or FY19) confirmed that the Indian economy has indeed hit a rough patch. The GDP growth rate of the economy has slipped to 5 per cent in the first quarter of FY20, the lowest in over six years.<br> <\/li><\/ul>\n\n\n\n<p><strong>Concerns\nabout reaching the aim of $5 trillion economy:<\/strong><\/p>\n\n\n\n<ol class=\"wp-block-list\"><li><strong>The\neconomic growth experience in India in recent decades has shown that growth has\nhad an adverse impact on developmental goals<\/strong> &#8211; Improvement\nin education, health and overall human development\/human capital formation,\nexpansion in productive employment for all and environmentally sustainable\ndevelopment, all depends on the nature and composition of growth.<\/li><\/ol>\n\n\n\n<p><strong>Share in wealth:<\/strong><\/p>\n\n\n\n<ul class=\"wp-block-list\"><li>Credit\nSuisse (a leading financial services company) has shown recently that 1% of the\nwealthiest in India increased their share in wealth from 40% in 2010 to more\nthan 60% in the last five years.<\/li><li>The\nrichest 10% in India own more than four times wealth than the remaining 90%.<\/li><\/ul>\n\n\n\n<p><strong>Gaps in Education:<\/strong><\/p>\n\n\n\n<ul class=\"wp-block-list\"><li>According\nto UN, the literacy rate has grown very slowly.<\/li><li>According\nto the Annual Status of Education Report (ASER) 2018, about 70-74 % children\n(in the age group 6-14 years) go to school regularly; far fewer go to secondary\nschool.<\/li><li>The\ngovernment spend is around 4% of GDP on education as against the norms of 6%.<\/li><\/ul>\n\n\n\n<p><strong>Gaps in Health:<\/strong><\/p>\n\n\n\n<ul class=\"wp-block-list\"><li>The\ngovernment spends around 1.5% of GDP on health as against the requirement of\n3%.<\/li><li>The\nissues of malnutrition are not being tackled at a good pace.<\/li><\/ul>\n\n\n\n<p><strong>Rising unemployment: <\/strong>The\nPeriodic Labour Force Survey (PLFS) of the National Sample Survey Office (NSSO)\nreleased in June 2019 showed the unemployment rate in the country in FY18 was\nat 5.3% in rural India and 7.8% in urban India, resulting in overall\nunemployment rate of 6.1%.<\/p>\n\n\n\n<p><strong>Environmental degradation: <\/strong>A\nrecent Intergovernmental Panel on Climate Change report has warned India of the\nseriousness of climate change and its severe adverse impact on the environment\nand the livelihood of masses.<\/p>\n\n\n\n<ul class=\"wp-block-list\"><li><strong>Economic Slowdown:<\/strong> At present the economy is experiencing a severe slowdown.<ul><li>Economic slowdown is a situation in which GDP growth slows but doesn\u2019t decline. For example, if GDP goes from 5% growth to 3% growth, an economy is experiencing a slowdown. Most analysts do not consider a slowdown to be a recession, but unemployment may rise and productivity may decline.<\/li><li>NITI Aayog has observed recently the rate of economic growth, at 5%, is the lowest in the last few years. <\/li><li>Also, the rates of savings and investment in the Indian economy have declined.<\/li><\/ul><\/li><\/ul>\n\n\n\n<ul class=\"wp-block-list\"><li><strong>Crisis is agriculture:<\/strong><ul><li>Agriculture in India is in crisis on account of rising costs of inputs and low prices of produces, and low public investments in this sector. <\/li><li>Agricultural real wages are in decline and non-farm wages are constant <\/li><li>Urban wages are also declining in recent years.<\/li><\/ul><\/li><\/ul>\n\n\n\n<ul class=\"wp-block-list\"><li><strong>Decline in major industries:<\/strong><ul><li>The automobile industry is experiencing continuous decline, which has led to the retrenchment of 3.5 lakh workers so far.<\/li><li>Apart from the ancillaries of the automobile industry, many other industries are declining fairly rapidly too \u2014 examples are diamond cutting and polishing, textiles and garments, and several Micro, Small and Medium Enterprises (MSME).<\/li><\/ul><\/li><\/ul>\n\n\n\n<p><strong>Measures taken by the government to improve the\nslowdown: (Supply side measures)<\/strong><\/p>\n\n\n\n<ul class=\"wp-block-list\"><li><strong>Tax Incentives: <\/strong>The Central Board of Direct Taxes (the CBDT) has provided in a\nrecently issued notification, that an investment fund set up by a Category-I or\nCategory-II Foreign Portfolio Investor (FPI) registered with the Securities and\nExchange Board of India (the SEBI) need not satisfy the investor\ndiversification conditions stated in the ITL to qualify as an EIF. <\/li><li>Additionally, the CBDT\nhas specified the list of countries in which the investment fund should be\nestablished, incorporated or registered to be eligible for benefits under the\nsafe harbor regime.<\/li><li><strong>Recapitalization:<\/strong>\nThe government on Friday announced a fresh capital infusion of about $10\nbillion (Rs.&nbsp;70,000crore) into debt-burdened\nstate banks and credit guarantees to support shadow lenders in a bid to boost\nlending and revive the economy.<\/li><li><strong>SME payments:<\/strong> SME payments are to be streamlined with a one-time settlement\nplan in place and the government is to ensure that it makes its payments on time\nfor projects (over Rs 40,000crore is stuck in the pipeline).<\/li><li><strong>Sectoral measures:<\/strong> The auto sector is to get some relief on\ndepreciation on vehicles and the government has clarified on the validity of\nregistration on Bharat IV vehicles, the government will now be buying new\nvehicles, which was barred earlier.<\/li><li><strong>FDI measures:<\/strong> The FDI rules now give single brand more\nbreathing space in terms of local procurement and setting up of physical\nstructures. Also, 100 per cent FDI through the automatic route in coal mining\nand related activities has been permitted.<\/li><li>As has 26\nper cent FDI under the government route for uploading\/ streaming of news and\ncurrent affairs in digital media. However, these rules take time to work out\nand one does not expect to see a flurry of capital flows.<\/li><li><strong>Mergers:<\/strong> in the\nbiggest consolidation exercise in the banking space, the government announced\nfour major mergers of public sector banks, bringing down their total number\nfrom 27 to 12, a move aimed at making state-owned lenders global sized banks<\/li><li>The\nmerger of PSBs will unlock new potential. Big banks with their national\npresence and global reach will have larger credit appetite and ability to\nmeasure risk.<\/li><\/ul>\n\n\n\n<p><strong>Urgent steps to\nbe taken by government: (generating demand)<\/strong><\/p>\n\n\n\n<ul class=\"wp-block-list\"><li><strong>Public\nemployment: <\/strong>It should raise public employment by filling all\nvacant sanctioned posts in the Central and State governments, which would be\naround 2.5 million jobs. <\/li><li><strong>Regularize\nother employments:<\/strong> The government should also regularize\ncontract, casual and \u201chonorary\u201d jobs and make them regular jobs.&nbsp;<\/li><li><strong>Human\ncapital formation<\/strong>: improving on skill development will\ngive a big push to start-ups and MSMEs. <\/li><li><strong>Focus\non labour intensive sectors: <\/strong>The government should also focus on\npromoting labour intensive sectors such as gems and jewellery, textiles and garments\nand leather goods.<\/li><li><strong>Increase\npublic expenditure in agriculture: <\/strong>government\nshould increase investments in infrastructure, inputs, extension, marketing and\nstorage and training and in providing profitable prices to farmers.&nbsp;<\/li><li>Government should also raise funds for\nthe Mahatma Gandhi National Rural Employment Guarantee Act to push up demand by\nfollowing a Keynesian approach.<\/li><\/ul>\n\n\n\n<p><strong>Conclusion:<\/strong><\/p>\n\n\n\n<p>Since, the real\nproblem is a crash in the aggregate demand, steps such as rolling back some\nbudgeted tax proposals, providing a stimulus package to industries, raising\nforeign direct investment flows, reducing Goods and Services Tax to help\nindustries are not likely to increase much aggregate demand in the\neconomy.&nbsp;There has to be a focus on human capital formation and in\naddressing the real reasons for the economic slowdown to be a $5 trillion\neconomy in future.<\/p>\n\n\n\n<p><strong>Source: <\/strong><a href=\"https:\/\/www.thehindu.com\/opinion\/lead\/the-slow-climb-to-the-trillion-economy-peak\/article29433451.ece\">https:\/\/www.thehindu.com\/opinion\/lead\/the-slow-climb-to-the-trillion-economy-peak\/article29433451.ece<\/a><strong><\/strong><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Context: To be a $5 trillion economy, the real reasons of economic slowdown needs to be addressed. More in News: On Independence Day, the Prime Minister expressed confidence that India would be a $5-trillion economy in 2024. The latest annual report of the RBI for the fiscal year 2018-19 (or FY19) confirmed that the Indian&hellip; <a class=\"more-link\" href=\"https:\/\/forumias.com\/blog\/7-pm-the-slow-climb-to-the-trillion-economy-peak-17th-september-2019\/\">Continue reading <span class=\"screen-reader-text\">7 PM | The slow climb to the trillion economy peak | 17th September, 2019<\/span><\/a><\/p>\n","protected":false},"author":61,"featured_media":49370,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"jetpack_post_was_ever_published":false,"footnotes":""},"categories":[130,9],"tags":[],"class_list":["post-52256","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-7-pm","category-public","entry"],"jetpack_featured_media_url":"https:\/\/i0.wp.com\/forumias.com\/blog\/wp-content\/uploads\/2019\/07\/7-PM.png?fit=1000%2C500&ssl=1","views":{"total":0,"cached_at":"","cached_date":1704855788},"jetpack_sharing_enabled":true,"_links":{"self":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts\/52256","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\/61"}],"replies":[{"embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/comments?post=52256"}],"version-history":[{"count":0,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts\/52256\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/media\/49370"}],"wp:attachment":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/media?parent=52256"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/categories?post=52256"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/tags?post=52256"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}