EDITORIAL ANALYSIS : The Growth Check-List

Source: Indian Express

• Prelims: Indian Economy(GDP, BOP, GVA, Economic reforms etc
• Mains GS Paper III: Indian economy and issues related to planning, mobilization of resources, Effect of liberalization on the economy etc

ARTICLE HIGHLIGHTS

• India has ascended from being the 10th largest economy in the world in 2014 to the 5th largest in 2023.
• The PM said that during the third tenure of our government, India will be among the top three economies of the world.

INSIGHTS ON THE ISSUE

Context

International Monetary Fund (IMF) projections:

• It projects that India will be the third-largest economy by 2027.
• India has registered the highest growth rate amongst G20 countries, surpassing China’s for two successive years.
• IMF’s historical data shows that India took six decades (1947 to 2007) to cross the one trillion-dollar GDP mark in 2007 ($1.2 trillion).
  • It took India just seven years to become a $2 trillion economy in 2014.
  • It added another $1.2(one point two)trillion by 2021.
• If India hits the IMF’s projected figure of $5.2(five point two)trillion by 2027: It would be adding $2 trillion in just six years.

GDP and per capita GDP in purchasing power parity (PPP)

• It determines what a US dollar can buy in that country.
• Measuring GDP on a PPP basis shows that India already has the third highest with a GDP of $13 trillion (PPP)
  • China is at the top ($33 trillion, PPP)
  • The US is second ($9(twenty six point nine)trillion).
• PPP conversion ratios can vary widely across countries
  • The price levels of goods and services could differ significantly.
• India’s conversion ratio from dollar to PPP is 3.5(three point five)-almost twice that of China at 7(one point seven).
  • Example: If a US dollar can buy a burger in its home country, the currency can buy 3.5 burgers in India and 1.7 burgers in China.
• India’s per capita income is the lowest in G20 countries in both dollar ($2,601) and PPP terms ($9,073)
• China’s one-child family policy from 1981 to 2016 has given the dividend of raising per capita GDP to $23,382 PPP,
  • The US is at the top with a per capita GDP of $80,035.

How can India raise Per Capita Income?

• People have to move from low-productivity jobs to high-productivity jobs.
• The largest segment of India’s working population (45 per cent) is still engaged in agriculture.
  • We need to raise agri-productivity and give farmers access to the best agri-markets.
  • It would help raise their incomes and dream of doubling farmers’ incomes.
• Doubling investments in agri-R&D, irrigation, rural infrastructure, and liberalizing agri-markets — both domestic and foreign.
  • The resources to do all this can be generated by rationalizing various subsidies
    • especially food and fertilizer subsidies at the central level
    • power subsidy at the state level.
  • Invest heavily in the education and skill development of rural people to build new cities
  • Undertake massive construction activities — homes, hotels, hospitals and schools.
    • Urbanization experts say almost 75 percent of New India is yet to be built.

Way Forward

• It requires political will and smart policymaking that can reward farmers for aligning farm practices with environmental sustainability.
• Bharat Mandapam and the new Parliament House are just the beginning of an India story.
  • It will require new skills and millions of people will have to move from rural areas to build New India.
  • It will be accompanied by high-productivity jobs in manufacturing and services.
  • China followed this developmental pathway.
• If India has to grow on a sustainable basis, it may have to follow a similar path with Indian characteristics.
  • If the government can expedite that process, it could help abolish poverty soon
• As per Niti Aayog’s report, it stands at almost 15 percent in 2019-21, down from almost 25 percent in 2015-16.
• The only visible challenge to this seems to be our competitive populism in politics (the revdi culture) in the run-up to elections.
  • The promised freebies are “bribes for votes”
  • It can derail India’s growth story.
  • The Supreme Court and/or Election Commission need to check these freebie promises to ensure meaningful democracy.

QUESTION FOR PRACTICE

Do you agree that the Indian economy has recently experienced recovery ? Give reasons in support of your answer.(UPSC 2021) (200 WORDS, 10 MARKS)

Editorial Analysis – 7 Aug 2023