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4th Nov. 2019 Answer writing

(General Studies III)

Q. What have been the fundamental weaknesses in the structure of the economy?  Critically Analyse                           250 Words

 

Model Answer:

 Of late 2011 and early 2012, Indian economy has shown resilience and positive growth momentum. However India’s economic fundamentals have weakened over the last four years which indicates this recovery to be short lived and may be backstabbing soon without structural reforms. The Indian economy has been experiencing slowdown over the past few quarters with GDP growth falling to 5 % in the first quarter of 2019-20, the lowest in 6 years.

Cyclic and structural problems in the economy:

Cyclic – weak consumer demand

Structural – NPA crisis, GST, fiscal deficit, bottlenecks in trade and exports etc.

In this context, the fundamental weaknesses in the structure of economy need to be removed along with countercyclical policies to revive demand and boost economic growth. The Government has a greater role to play in this regard.

ROLE OF GOVERNMENT

Countercyclical policies:

  • Reviving rural demand through wage growth. Eg: revamping MGNREGA
  • Boosting consumer sentiment
  • Ensuring adequate availability of credit
    • Lower borrowing costs.
    • Boosting investors confidence

Structural Policies

  • Trade Facilitation for boosting exports
  • Removing bottlenecks
  • Speedy GST refunds
  • Resolution of NBFC crisis and infusion of liquidity in the market
  • Increase govt. spending through disinvestment, increased capital expenditure with the help of State Govt., PSUs, Public-private partnership.

Way forward

So the Structural reforms in infrastructure, farm sector, labour market, fiscal policies and trade liberalisation need to have a stable, long term economic growth in India.

 

Reviving consumer demand along with addressing sector specific structural problems in the Education, agriculture, banking sector, GST, plans and programmes is the need of the hour. A holistic policy of the government along with proper incentives is required for bringing the economy out of its slowdown phase.

 

Date- 04/11/2019                                                                                                      (Dept. of Content Development)

 

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