Do you agree with the view that steady GDP growth and low inflation have left the Indian economy in good shape? Give reasons in support of your arguments.

India was one of the fastest-growing economies in the last few years. There are no disagreements over the fact that the steady GDP growth and low inflation had helped the economy to some extent as highlighted below:

  • Low inflation allowed the RBI to reduce the repo rates which provided capital for industrialists at cheaper rates.
  • Steady GDP growth rate provided for a better and optimistic outlook about the economy. This resulted in greater investments and FDI.
  • Steady growth rate made possible for the government to introduce reforms such as GST. This steady growth enabled the government to inject bitter pills.
  • Steady growth enabled the government to maintain prudent macroeconomic credentials. This provided a better economic outlook of the economy which was significant in providing an optimistic outlook.
  • Steady growth also provided for better revenue prospects which assisted the government to spend on welfare schemes such as Ujjwala Yojana, Pasal Bima Yojana etc.

But steady GDP growth and low inflation were not sufficient. Here’s Why?

  • Low inflation is also an indicator of low demand. Low demand has adversely affected the industrial output.
  • Low inflation has resulted in reduced returns for farmers. This has adversely affected the rural economy and resulted in agrarian distress.
  • India’s steady growth was not inclusive while the service sector singlehandedly drove the growth rate the agricultural sector grew at less than 3 per cent and the industrial output also buckled under pressure.
  • The steady growth rate did not translate into employment opportunities and the unemployment rates stood at a 45 year high.

It is prudent to say that lack of policy directions coupled with banking sector crisis severely clamped the ability of the economy to reap the benefits. Hence the country is facing the gloom of economic slowdown.

Published: October 17, 2019 | Modified:December 1, 2019

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