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Is India’s growth story plateauing?

  • Category
    Economy
  • Published
    7th Jun, 2019
  • Official estimates released on May 31, show GDP growth slowed to a five-year low of 6.8% in 2018-19, even as the unemployment rate rose to a 45-year high of 6.1% in 2017-18.
  • The economy is struggling with an investments and a manufacturing slowdown, rural distress, unremunerative farm incomes, stagnating exports, a banking and financial mess and a jobs crisis.

Issue

Context:

  • Official estimates released on May 31, show GDP growth slowed to a five-year low of 6.8% in 2018-19, even as the unemployment rate rose to a 45-year high of 6.1% in 2017-18.
  • The economy is struggling with an investments and a manufacturing slowdown, rural distress, unremunerative farm incomes, stagnating exports, a banking and financial mess and a jobs crisis.

About:

  • The top economic priority for the new government ought to be credible course correction in its attitude to policy — its formulation, articulation and the setting of goals.
  • What is critically important is to an overhaul of labour and land policies and a much-needed manufacturing push, ‘Make In India’, for absorbing the slack from the farms.

Background:

  • According to book – “The Lost Decade 2008-18: How India’s Growth Story Devolved in Growth without a Story”, for a large economy like India, what was needed was to do sequencing of reforms, which was not done and, worse, a measure such as the demonetization was introduced, jolting the economy.
  • Today, India’s GDP is growing at a world beating rate, but little on the ground suggests that people are actually feeling better off.
  • Accelerating the rate of growth is not sufficient. What sets apart successful economies from the unsuccessful is the duration for which fast growth is sustained.
  • India’s economy was thriving and GDP growth was at an impressive 8.8 per cent before the global financial meltdown in 2008.
  • Sequence of events prove that in the decade that followed each time the country’s economy came close to returning to that growth trajectory, political events derailed it.
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