In the context of present global economic slow down, India needs explore various ways to spend its capital for better economic growth trajectory. Elucidate (200 Words)
Refer - The Indian Express
Enrich the answer from other sources, if the question demands.
IAS Parliament 5 years
KEY POINTS
· Successful implementation of the structural reforms in 1991 pushed India’s potential growth rate to a high level.
· Several sectors such as automobiles and housing are facing a sharp weakening of demand. And there has been a significant fall in the savings and investment rate.
· Within household savings, the proportion of savings in financial assets has sharply declined. Apart from these, a significant growth-stifling factor is the weakness of the banking and non-bank finance sectors due to both cyclical and structural reasons.
Ways to spend capital
· The RBI has reduced the repo rate by 110 basis points since February 2019, reducing it from 6.5 per cent to 5.4 per cent.
· The central government has also undertaken a number of steps post the 2019-20 budget which include — withdrawal of enhanced surcharge on foreign portfolio investors, a public sector bank consolidation plan, additional depreciation rates for vehicle manufacturers, additional credit support for housing finance companies and recapitalisation of public sector banks.
· This persistent downward trend of the saving and investment rates has led to a fall in India’s potential growth rate to below 7 per cent.
· In the present context of a declining investment rate and declining demand, a good solution will be to enhance government expenditure, especially capital expenditure.
· On the scope for increased spending, the bonanza from the RBI will go only to meet the shortfall in revenues. A larger disinvestment may help.
· The decline in price level in recent years partly because of the new monetary policy framework has affected the nominal GDP growth rate and growth rate of tax revenues.
· Options include bringing on board state governments for increasing their capital expenditure relative to their respective gross state domestic products (GSDPs).
· The Centre may invest through central public sector enterprises (CPSEs) an additional one percentage point of GDP compared to the present levels.
· Further, through the public-private partnership (PPP) mode, the private sector may be induced to supplement the government’s investment in select projects. The amended FRBM Act has a provision for increasing the fiscal deficit by 0.5 per cent of GDP under certain circumstances. The government can make use of this provision.
Shantanu tiwari 5 years
Please review
IAS Parliament 5 years
MURALIDHARAN 5 years
Pls review
IAS Parliament 5 years
India's expenditure is not needed and explain the flowchart in few lines. Avoid listing out points and explain them. Keep Writing.
Rahul 5 years
Pls review
IAS Parliament 5 years
Reasons for economic slowdown is not needed. Try to focus more on ways to spend capital. Keep Writing.
Shivangi 5 years
Please review. Thank you.
IAS Parliament 5 years
Good answer. Keep Writing.
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