Global Challenges for Indian Economy

What is the issue?

Indian economy is facing a challenging situation due to various protectionist measures taken globally.

What are the concerns with Indian economy?

• Economic growth for 2018 has been assumed by the government at less than 8 per cent, which is lower than that in FY16.
• The Capital Account Deficit is high and quantum of investments from foreign investors are in stagnation.
• Private investment also appears to be stagnant while states are also not in a position to invest given their tenuous fiscal structures
• India is facing a banking conundrum such has higher unidentified NPAs, limited resolution of the IBC cases, capital shortages for growth of banks.
• The stock market has been aggressive in FY18 where it was hard to find linkage with fundamentals and might face further stress.
• Thus the comfort which was experienced by Indian economy on several fronts in the last fiscals may not be available now and it can potentially cause volatility.

How global polices affects Indian economy?

• In recent times most of protectionist policies of the West are aimed at high spending on infrastructure which would provide opportunity for investors.
• USA’s ‘America First’ is aimed at making the US a powerful economy through a strong dollar policy affects Indian rupees.
• US policy will also mean reversal of capital flows from emerging markets.
• A stand-off on the trade war between the US and China is existing, therefore the India cannot expect high returns.
• An unchanged level of uncertainty on the political relations in the oil world affects the petroleum prices in India.

What measures needs to be taken by the government?

• Government is taking various measures in its policy for recapitalization of banks and taking banks out of their debt crisis.
• Disinvestment plans for getting released from stressing PSUs will help government to revive its growth target.
• Since FY18 is pre-election year government cannot introduce any radical economic reform government need to find out policies to manage the changing global scenario.

Source: Business Line