UPSC General Studies PAPER-III: Indian Economy Q&A

India’s growth performance in 2015 was certainly a bright spot. Comment?

Globally, the prognosis for 2016 is not that good. Among the major advanced economies, the only country that can show some improvement is the United States. Among the emerging economies, the slowdown in the performance of China and the consequent further devaluation of Yuan may have serious spillover effects.

India’s growth performance in 2015 was certainly a bright spot. It has, however, fallen short of our expectations and needs. A strong recovery is possible in 2016 with a growth rate exceeding 7.5 to 8.5 percent but that is contingent on private investment, particularly private corporate investment, showing substantial improvement and creating a proper investment climate is needed.

The fiscal picture for 2016, however, is going to be tough. The additional burden imposed by the Seventh Pay Commission is substantial. The expenditure on pay and pension will increase by 20 percent and it will amount to a burden of 0.4 per cent of GDP, after taking into account the additional tax revenue on the increased emoluments.

Improve the investment climate and also to create a good confidence among the investor and public is needed for boosting the investments in all the sectors. The corporate sector faces several internal problems, including a slow growth in nominal sales revenue and high levels of debt.

It is true that the reform agenda of the government has been stymied. But much can be done to restore and enhance confidence in the economy.

By T Anand IAS Mentor