24 Mar The prospects of India’s growth under the Global uncertainty
The prospects of India’s growth under the Global uncertainty- Today Current Affairs
Context : For several months Global uncertainty is at its peak . This ongoing geopolitical uncertainty erupted with Russia’s invasion over Ukraine . Under such global uncertainty India has to opt for some fiscal measures for the development . On February 28, 2022, the National Statistical Office (NSO) released India’s GDP data for Q3 of 2021-22 along with Second Advance Estimates (SAE) for 2021-22. Post COVID-19, the normalization of the Indian economy has now been disturbed by the ongoing geopolitical uncertainties. This would only be tackled through strong and appropriate fiscal measures
Today Current Affairs
- The Indian economy had to face several obstacles in front of its growth. One big obstacle was COVID- 19 , As we overcame from the corona pandemic another geopolitical problem had erupted with the Russian Ukraine conflict. Because of this crisis the price of crude oil increased and the balance of payment also suffered during this crisis . Indian rupee is continuously tending toward degrading .
- In the COVID-19 year of 2020-21, both real GDP and GVA contracted by minus 6.6% and minus 4.8%, respectively. The NSO’s SAE shows that real GDP and GVA growth are estimated to recover to 8.9% and 8.3%, respectively, in 2021-22. Despite this improvement, the magnitude of real GDP at ₹147.7 lakh crore in 2021-22 is only marginally higher than the corresponding level of ₹145.2 lakh crore in 2019-20.
- If we see this GDP data of 2021-22,we find nominal growth of GDP is significantly higher than the real GDP growth due to an inordinately high implicit price deflator (IPD)-based inflation rate of 9.6%. This must be considered by the economist and policy makers of India
- If we observe the magnitude of demand , it is slightly reviving but the production in the manufacturing sector could not revive after the corona pandemic because of the geopolitical crises (mainly automobile sector , because of hike in fuel price ). Therefore it seems that the annual growth in 2022-23 would not be more than 7 % which is far less.
The impact of price hike in petroleum products in growth : The Hindu Analysis
- However it is very difficult to estimate the impact of a hike in petroleum price on the GDP but through several data related to growth and inflation, we can assume the impact of the Crude upsurge.
- The estimated impact is a reduction in real GDP growth by 27 basis points and an increase in CPI inflation by 40 basis points. This is based on using the baseline global crude price level of U.S.$75/bbl.
- Beside the price hike of the petroleum products , there are several other challenges which must be tackled effectively by the policy makers . These challenges are. The Hindu Analysis.
- Because of the price hike of crude oil, the government has to give some subsidies to petroleum products (Fertilizers and fuel). The Government should attempt to keep the fiscal deficit at the budgeted level.
- Because of the global uncertainty the Indian rupees would be continually degrading which would result in higher import bills. Government must reduce some import up to its maximum extend. The Hindu Analysis.
- Government, if it reduces the internal taxes on petroleum products which would bring inversely impacts on the income of the government. Ifnot, it will result in the rapid price hike of the fuel through which inflation would also be increasing rapidly and overall economic crises would erupt. Government must make a balance in this regard
- Developed countries are increasing interest rates. But India , if increase interest rate, it would bring more inflation, therefore our policy makers should not make any policy under the pressure of the inflow of dollar.
Today Current Affairs
This is the crucial time of the Indian economy. One side geopolitical uncertainty is there ,on another side we are slowly coming out from the bad impact of the corona pandemic. Our Government should adopt very appropriate and balance fiscal policies so that our economy could tackle these challenges . Government Should not make policy only for the political benefits in coming elections but also for quick and steady revival of the Indian economy