04/01/2018 - Indian Economy

KEY POINTS

There are five issues need to be addressed comprehensively if India is to achieve sustained high growth.

Investment ratio

·        The growth rate depends on the investment rate and the productivity of capital or its inverse incremental capital-output ratio. For ensuring a sustained high growth, we need to raise the investment ratio and keep the incremental capital-output ratio at 4.

·        Indian needs more investment from private sector and the government of India has the responsibility of providing conducive environment for the private investors.

·        Measures: reducing the judicial delay, further improvement in ease of doing business by simplifying the administration.

Banking system

·        An important factor affecting economic growth is the condition of our banking system. Non-performing assets (NPAs), including stressed assets, as a proportion of loans of public sector banks stood at 16.7%.

·        As many as 11 public sector banks are under Prompt Corrective Action (PCA). This restricts the lending abilities of these banks. Added to this, the non banking financial company (NBFC) system is also under stress.

·        Measures: Recapitalization of Public sector banks along with reforms in the bank administration, Scheme for Sustainable Structuring of Stressed Assets, adopting the project Sashakt.

Employment growth

·        The employment in the informal sector is much larger; despite having the growth rate around 7%, there no corresponding growth in employment. Less employment is attributed to the lack of new investment in the Indian economy and improved efficiency of utilisation of existing capital led to a marginal increase in employment.

·        Measures: Imparting necessary and required skills to dropouts across states, formalizing the work force, reducing the gender inequality in providing wages.

Agrarian distress

·        The fundamental problem is one of increasing productivity and enabling farmers to achieve increased output and better prices.

·        The fall in prices of agricultural products is in one sense a reflection of our success in raising output.The need of agriculturists is income in current prices.

·        The important requirement in this context is not only the financial capacity of the government to procure but also adequate physical arrangements to procure and store.

·        The procured agricultural products can be sold by the government in later years when output is low or utilised in any safety net programme.

·        Loan waivers are at best short-term solutions. The average size of landholding is so small that any amount of increase in productivity will not give adequate income. Farmers have to think in terms of consolidation of landholdings so that they can get the benefits of larger size. 

Kindly review Thanks

Kindly review.thanks

Kindly review it. 

Recently government has come up with an idea of making India a 5 trillion $ economy in next 7,8 years. India currently is the fastest growing economy with 7-7.5% growth rate, in order to sustain this growth government must address some challenges such as:

A)  Contolling public debt, controlling fiscal deficit which is above 3%.

B) flight of foreign funds

C) development of infrastructure

D)twin balance sheet problem

E) making robust banking system.

F) attracting investment

Remedies:

A) Recapitalization of PSBs to promote investment.

B) encouraging MSMEs through providing loans

C)Expedite infra projects.

D) promoting entrepreneurship, intellectual property.

E) developing bond market in india.

Conclusion: India has the potential to grow with 7-7.5 %. Through suitable measures we can sustain it for a long period.