India needs a new economic policy.
Context:
The recently released GDP growth rate figures for the fourth quarter of 2022-23 by the National Statistical Office (NSO) paint a less cheerful picture compared to the portrayal by media outlets under the Press Information Bureau.
Relevance:
GS-03(Growth and Development)
Prelims:
- GDP
- National Statistical Office (NSO)
- “Vikas” agenda
Mains Question:
- Discuss the key trends in India’s GDP growth rates based on NSO data since 2014-2015 and their implications for the country’s economic trajectory. (150 words)
Dimensions of the Article:
- Declining Growth Trajectory
- Reality vs. Rhetoric
- Narasimha Rao and Manmohan Singh’s Economic Momentum
- Lingering Decline
- Unfulfilled Predictions and Lack of Structure
Declining Growth Trajectory:
- The trajectory of GDP growth rate since 2015-2016 displays a persistent annual descent, reaching a point reminiscent of the much-discussed “The Hindu Rate of Growth” – a term cynically employed by economists to characterize the 3.5% GDP growth rate.
Reality vs. Rhetoric:
- Delving into the years following 2014, a closer examination reveals that despite the widespread promotion of Prime Minister Narendra Modi’s “Vikas” agenda, the reality mirrors the earlier 1950-77 era’s “Hindu rate of growth” in GDP – an ironic revelation.
Narasimha Rao and Manmohan Singh’s Economic Momentum:
- An exploration of GDP growth rates during the administrations of P.V. Narasimha Rao and Manmohan Singh uncovers a noteworthy upswing from 1991-96 and 2004-2014.
- This period saw GDP growth rates in the range of 6% to 8% annually, signaling a pivotal turning point.
Lingering Decline:
- A troubling trend surfaces – the consistent and unrelenting decline in GDP growth rates, which initiated in 2016 and continues its course even now.
- The Modi government’s economic policy structuring during the period 2014-2023 falls short, raising concerns.
Unfulfilled Predictions and Lack of Structure:
- While the media frequently showcases optimistic predictions, including Prime Minister Modi’s proclamation of a $5 trillion GDP by 2024 (stated in 2019), these claims remain unaccompanied by substantial policy structuring.
Way Forward:
Creating a structured economic policy involves defining objectives, setting priorities, strategizing incentivization, and pruning non-essential elements. Amidst current economic challenges, abolishing personal income tax and scrapping Goods and Services Tax could stimulate investment and income generation.
- Resource Mobilization and Sectoral Support: Government resources can be mobilized through indirect taxation and increased currency circulation via extensive public works. Elevating annual interest rates on fixed-term bank savings and reducing loan interest rates for small and medium industries could bolster purchasing power and production.
- Modinomics Critique: An assertive critique contends that “Modinomics” lacks structure and falls short of achieving any macroeconomic goals announced thus far. The writer challenges the disjointed public pronouncements from the Finance Ministry, advocating for a more coherent approach.
- The Urgent Need for a New Economic Policy: India’s pressing need for a revamped economic policy becomes evident. This policy should encompass defined objectives, strategic priorities, intelligent resource mobilization, and accountability. The Finance Ministry’s current hotchpotch approach necessitates transformation.
- Market System and Structure: The market system isn’t a haphazard arrangement but rather a regulated structure governed by transaction rules. Capitalism in a market system thrives on incentives and capital deployment, akin to China’s realization during Deng Xiaoping’s era.
- Balancing Deregulation and Social Safety Nets: While deregulation is essential, it shouldn’t disregard government intervention for safety nets, affirmative action, and addressing market failures. Empowering democratic institutions guards against tumult arising from rapid de-regulation, as witnessed in post-1991 Russia.
- Balancing Public Sector and De-Regulation: A delicate balance must be maintained between the public sector, de-regulation, employment enhancement through affirmative action, and social security accessibility. This creates equity within a competitive framework, fostering transparency, accountability, and corporate governance.
Conclusion:
In a nutshell, the NSO’s GDP growth rate figures provide a nuanced insight, revealing the decline in growth trajectories, unmet economic predictions, and the call for a more structured economic policy. This analysis underscores the urgency for India to redefine its economic direction with clear objectives, a coherent strategy, and prudent resource allocation, fostering a balanced, competitive, and inclusive market system.
