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India Needs A New Economic Policy UPSC NOTE

 


GDP growth rate trends in India

  • The National Statistical Office (NSO) has released the 2022-23 GDP fourth-quarter growth rate figures. 

  • Measured against fourth-quarter figures of the previous year, the data give a gloomier picture than what the media publications of the Press Information Bureau present. 

  • According to NSO data, in the first COVID-19 pandemic quarter of 2020-21, i.e., April 1 to June 30, 2020, GDP growth rate was minus 23.8% when compared to GDP of the same period in 2019-20.

  • Three conclusions based on NSO data since 2014-2015 are important for a reality check. 

  • First, the growth rate of GDP, since 2015-16 had been declining annually, and has fallen in the fourth quarter to what it was earlier, and sneeringly referred to by economists as “The Hindu Rate of Growth” — 3.5% growth rate in GDP.

  • Second, it is essential to recognise that since 2014, Prime Minister Narendra Modi’s widely publicised “Vikas” in reality achieved the so-called “Hindu rate of growth” in GDP of what had been achieved in the period 1950-77 — the socialism period.

  • Third, during the tenures of P.V. Narasimha Rao and Manmohan Singh, GDP growth rates rose for the first time to between 6% to 8% per year over a 15-year period, i.e., 1991-96 and 2004-2014 (with the usual cyclic ups and downs).

    • They both reduce state participation and increase incentives for capital and labour providers, thus achieving a higher and faster growth of the economy.

  • What is alarming today is the serious and continuous decline in GDP growth rates which began in 2016. And that decline continues even now. 

Steps to be taken

  • Clear implementation of what the economic objectives will be, and priorities that should be assigned to the various objectives. 

  • Thereafter, there ought to be a strategy on what should be incentivised and what should be deleted or discontinued. 

    • For example, in today’s dark economic condition, it is essential that personal income tax is abolished and Goods and Services Tax scrapped to incentivise investors and earners.

  • Resources by the government should be mobilised through indirect taxes.

  • Also by liberal printing of currency notes and which is circulated by paying wages to the employment generated in extensive public works. 

  • The annual interest paid on fixed-term savings in bank accounts should be 9% or so to increase purchasing power of the middle classes. 

  • Interest rates on loans to small and medium industries should be no more than 6% of the loans to increase production of these sectors, and thus employment.

  • India needs a new economic policy urgently. 

  • It needs to be a policy that is based on clear objectives, priorities, have a strategy to achieve targets, and spell out an intelligent and transparent resource mobilisation plan to finance policies. 

  • The market system is not a free-for-all or an ad hoc measure. It has a structure with rules for transactions. 

  • Market system capitalism works as the principal drivers are incentive and capital (whose use for innovation raises factory productivity and the growth rate of GDP). 

  • Deregulations should also not mean that we reject government intervention for safety nets, affirmative action, market failure and creating a level-playing field. 

  • Democratic institutions have to be empowered to guard against public disorder arising from rapid de-regulation — as it happened in Russia post-1991. 

    • Russia experienced chaos and misery. This dictatorship has returned for the Russians, and with it a complete loss of human rights and democratic values.

  • The trade-off between the public sector and de-regulation and the sale of loss-making units,

    • increasing employment, through affirmative action, and easy access to social security .

  • A safety net are essential to create a stake for the poor in the system. 

  • This creates a level-playing field in a competitive system, ensures transparency, accountability, and trusteeship (philanthropy), as well as corporate governance to legitimise profit-making smoothly which drives the market system. 

  • Such steps reduce monopolistic tendencies and help in the formation of a democratic and harmonious society.

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Learnerz IAS | Concept oriented UPSC Classes in Malayalam: India Needs A New Economic Policy UPSC NOTE
India Needs A New Economic Policy UPSC NOTE
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