Economy likely to grow by 7% this year Survey

The Hindu : Page 01

Syllabus : GS 3 : Indian Economy

India’s economy is projected to grow at 6.5% to 7% in the fiscal year ending March 2025.

The Economic Survey for 2023-24 highlights the need to address inequality and unemployment as policy priorities.

Various Challenges discussed

•  Challenges in the IT Sector:

1.  Slowdown in Hiring: The CEA notes a significant slowdown in IT sector hiring over the last two years.
2.   AI and Labor: He encourages the industry to use AI to augment labor rather than replace workers.

•  Skilling Initiatives

1.  Addressing Inequality: The Economic Survey suggests steps to tackle inequality, improve health, and bridge the education-employment gap.
2.  Skilling Reboot: A reboot of India’s skilling initiatives is proposed to provide the industry with people having the right attitude and skills.

•   Corporate Sector and Economic Growth

1.  Demand and Employment: The Survey emphasizes the benefits for corporates from higher demand generated by employment and income growth.
2. Warning against Short-Termism: It warns against “short-termism” which can weaken economic linkages.

•  State Capacity and Consensus Building:

1.  Enhancing State Capacity: Enhancing state capacity is critical for the strategy to work.
2.  Need for Consensus: The CEA stresses the need for consensus between governments, businesses, and the social sectors for effective transformation.

•   Land Acquisition and Investment Concerns:

1.  Land Use Norms: While the Survey does not mention land acquisition reform, it highlights the need to deregulate land use norms and consolidate farmland holdings.
2.  Investment Cautions: The Survey cautions about private capital formation being cautious due to fears of cheaper imports, indirectly referencing China.

•   Foreign Direct Investment (FDI) Challenges:

1.  Attracting FDI: Attracting FDI will be challenging due to higher interest rates and developed countries encouraging domestic investments through subsidies.
2.  Addressing Uncertainties: Despite progress, uncertainties related to transfer pricing, taxes, and import duties need to be addressed.

Structural Reforms

• o  Existing Reforms: Structural reforms such as GST and the Insolvency and Bankruptcy Code are delivering expected results.
• o  Next-Gen Reforms: The Survey calls for “next-gen reforms” that are bottom-up in nature to achieve sustainable, balanced, and inclusive growth.

Strategic Directions for Growth

• o  Six-Pronged Strategy: The Survey outlines a six-pronged strategy for growth, emphasizing private sector investments and a fair share of income for workers.
• o  Focus Areas: Other focus areas include financing the green transition, removing barriers for MSMEs, and implementing intelligent farmer-friendly policies.

Conclusion

• o  Sustained Growth Potential: The economy can grow at over 7% on a sustained basis in the medium term by building on past reforms.
• o  Tripartite Compact: Achieving this growth requires a tripartite compact between the Centre, States, and the private sector.

 UPSC Prelims PYQ : 2013

Ques : Economic growth in country X will necessarily have to occur if:

(a) There is technical progress in the world economy.

(b) There is population growth in X. 

(c) There is capital formation in X.

(d) The volume of trade grows in the world economy.

Ans : c)