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State of the economy — temper the euphoria

  • Published
    18th Nov, 2023

Context:

Recent analyses of India's economic outlook, emphasizes on IMF's optimism & challenges like trade deficit with China, and other social development issues.

Economic Optimism and Global Dynamics

  • IMF's Revised Growth Projection: IMF's World Economic Outlook raises India's 2023-24 GDP growth to 6.3%, applauding short-term economic management.
  • Global Economic Divergences: World GDP projections decline, with China's revised growth by 0.3%, highlighting India's relative success.
  • Concerns amid Success: Despite growth, challenges in employment, inflation, and geopolitical vulnerabilities persist, urging a comprehensive economic assessment.

China's Trade Deficit and Economic Frailty

  • Structural Dependence on Chinese Imports: India faces a rising deficit with China, showcasing economic frailty despite declining net exports to GDP ratio.
  • Impact of Import Restrictions: Atmanirbhar Bharat Abhiyan aimed to curb Chinese imports, but domestic production struggled without critical inputs, impacting industrial growth.
  • Declining Industrial Growth and Investment: Industrial growth rates, particularly in capital goods, witness a sharp decline, reflecting a decade-long fall in fixed investment rates.

Challenges

  • Human Development Index (HDI) Decline: India's HDI ranking slips, pointing to social development challenges and the need for a broader economic perspective.
  • Trade Deficit's Strategic Threat: The relentless rise in the trade deficit with China poses a strategic threat, necessitating policy measures beyond short-term growth.
  • Engaging with Critics and Economic Realities: Official commentators should address economic setbacks, acknowledge critics, and prioritize long-term economic resilience over short-term growth.
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