India's Economic Conundrum: The Search for a Growth Driver Beyond Government Spending
UPSC Relevance
Prelims: Indian Economy (National Income - components of GDP, Growth); Fiscal Policy (Taxation, Capital Expenditure); Monetary Policy.
Mains:
General Studies Paper 3 (Economy): Indian Economy and issues relating to planning, mobilization of resources, growth, development and employment; Investment models; Government Budgeting. This is a quintessential GS3 topic analyzing the health and drivers of the Indian economy.
Key Highlights from the News
The primary engines of growth in the Indian economy, which have been strong recently, have been government expenditure alone. However, its growth rate is decreasing.
Net exports are slow due to global uncertainties.
Private investment is not significantly increasing because industries are not utilizing their full industrial capacity utilisation.
Therefore, to drive economic growth, the focus is now mainly on household consumption.
Main Challenge: Increasing consumption is not easy. It requires a significant economic stimulus.
Government Actions:
**GST rates** were cut to reduce prices.Income-tax rates were reduced to increase disposable income.
However, the oversupply of labour and skill deficit in the job market mean that people's wages are unlikely to increase significantly, which remains a major challenge.
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