Make a critical assessment of the economic situation in current times in India. What short term and long term measures would you suggest to address the situation? Discuss.
The nature of the economy of India is still a developing market economy. It has become the world’s 5th largest economy (nominal GDP) by overtaking the United Kingdom and France and the 3rd largest by PPP (purchasing power parity).
The journey of India’s economy: After independence, the journey of the Indian economy started with the nature of the agrarian economy. Gradually, the industrial sector from the year 1991 and the services sector has emerged with a strong foundation.
Presently the service sector is contributing 60% to its economy and responsible for providing 28% of employment.
The initiative like “Make in India” provides an impetus to the manufacturing sector.
The contribution to the agricultural sector is still in a better position compared to western nations.
It was the scenario before the pandemic outbreak. Currently, it has experienced an immense slowdown due to the cessation of all three sectors of the economy. Current GDP growth stands at 3.1% in the fourth quarter, a decline from 6.9% in FY19.
Short term Measurements: Short term objectives of an economy are plan specific in nature. They are often concerned according to immediate demand as envisaged by the policymakers. In the case of India, the short term objectives could be achieved by the following way
- To revive the Foreign portfolio investment the tax hike for the high-income policy is a matter of reconsideration.
- Reduction of corporate tax
- The present economic crisis is demanding money supply in the market. Thus reduction of statutory liquidity ratio (SLR) and allowing the State banks to lend could be a better option.
- Provide assistance for the recovery of non-banking financial companies (NBFC)
- More incentive to the automobile sector.
- Attracting the Foreign Direct Investment, privatization, or direct sale of loss-making PSUs to enrich the National Investment and Infrastructure Fund.
- The Essential Commodities Act needs attention to liberalize the farming sector.
- Schemes like PM-KISAN and MGNREGA need more funding.
Long term measurement: Long term objective of an economy focuses on targets like poverty alleviation, self-sufficiency, Employment generation, overall economic growth, etc. The short term measures work like a unit to achieve the long term goal.
The recent budget of India fixed the theme of “Ease of Living” by adopting the Digital governance, Disaster Resilience, Pension, and Insurance penetration, 5 trillion dollar economy by 2024-25 as its long term objectives.
India will definitely be able to achieve its short term as well as the long term objectives through limited dependence on exports, high saving rates, balanced demographics, and focusing on the rising middle class.
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