How to get the economy on the fast track
While the outlook is bleak on jobs, spending and inflation, there are many areas with potential that the govt can leverage
With strong macroeconomic fundamentals, demographic dividend, highly-skilled English-speaking workforce, ease of doing business, cheap labour, enormous resources and an expanding market of 1.3 billion people, India is a fundamentally strong country. However, over the past four-five years, the economy has gone off the fast-growth track, hastened by the Covid-19 pandemic.
Former RBI Governor Raghuram Rajan said that India’s V-shaped economic recovery is no particular cause for cheer, as “the important question is, have we come out of the malaise and will we return to our trend level of growth?” If a bad enough downturn is created, the recovery will always be V-shaped.
Anand Mahindra wrote on his Twitter handle: “The Indian economy is often referred to as an elephant. More recently, it was termed a tiger as its growth sped up. Well, even if it’s an elephant, this shows that you should never count us out; we always find a way no matter how awkward — to get over hurdles in our way!"
Such perspectives do not underline a positive outlook. It reveals that India’s path to progress is bedevilled by both global and domestic hurdles.
Despite the government’s narrative of back-on-track economic growth, private final consumption expenditure, an indicator of consumer demand from households, is still far from the pre-pandemic levels. The Consumer Confidence Survey conducted by the RBI for November indicates that the outlook vis-à-vis employment, income, spending and inflation continues to be pessimistic.
Global commodity prices are on the upswing, , and with global economic growth looking up, supply bottlenecks are likely.
Global interest rates are expected to have an impact on the rates in India. Historically, FIIs have been seen withdrawing partially from a market after periods of sustained outperformance. The US dollar is expected to strengthen against a basket of currencies, including the rupee, and this could also be a dampener on FII inflows in the near term.
The Centre for Monitoring the Indian Economy reports the unemployment rate for college graduates is 19.3 per cent, almost three times higher than the national average.
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