What are the major macroeconomic challenges before the Indian economy today?
Published: October 28, 2018
India is one of the fastest growing economies of the world and it is also facing myriad of complex challenges. These challenges if not addressed through policy initiatives it may trigger a crisis denting the credibility of India.
Challenges before the Indian economy
Stumbling Stock Market
Stock prices are dropping which is resulting in eroding of wealth. There has been a steady withdrawal from the foreign portfolio investors.
The rupee is witnessing a freefall and is performing badly against the dollar. The rupee has depreciated 16 per cent in 2018.
Crude Price Increase
The crude price is skyrocketing. The global uncertainties due to US sanctions on Iran, turmoil in the Middle East will further increase the prices. The twin burden of depreciating rupee and increasing prices of crude will cause a double whammy on Indian consumers.
Rainfall has been below average. Lack of adequate infrastructure and resources to procure under MSP, farmers agitations across the country is a testimony of the structural challenge haunting the sector.
Merchandise exports are facing a crisis. Reduction in quantum of exports has resulted in fewer dollars to pay for imports.
Non-Performing Assets and Credit Crunch
Non-performing assets of banks have crossed Rs 10,00,000 crore. A systemically important NBFC, Infrastructure Leasing & Financial Services Ltd, has collapsed; Growth of credit to industry is struggling.
The CMIE data shows that the unemployment rate was 6.6 per cent in September 2018, up from 6.3 per cent in August.
The growth rate of net tax revenue was 7.45 per cent against the budgeted growth of 19.15 per cent. The government has been able to raise only Rs 9,686 crore from the disinvestments against the budgeted target of Rs 80,000 crore. The current account deficit (CAD) at the end of September 2018 is estimated to be USD 35 billion.
All these economic challenges will burden the economy and push the inflation up. This will exert an upward pressure on interest rates. This demands an competent economic strategy.
Model Questions Category: 060 - Economic Growth Development