Gist of Editorials : Hope With Concerns (The Hindu) | GS – III

In the final analysis, the growth rate depends on the investment rate and the productivity of capital or its inverse incremental capital-output ratio.

Relevance : GS Paper  III (Indian Economy)

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Globally, the growth rate in 2018 was high but strong signs of a trade war emerged.

Situation of Indian Economy in 2018-19:

  • Rupee underwent a severe shock .
  • Agrarian distress accentuated.
  • India’s growth rate forecast at 7.4%.

Major concerns with Indian Economy:

  • INVESTMENT RATIO : The growth rate depends on the investment rate.
    • Solution:Raise investment ratio and keep capital-output ratio at 4.
  • BANKING SYSTEM:
    • Non-performing assets (NPAs) are at a high level.
    • 11 public sector banks are under PCA.
    • NBFC system is under stress.
    • Solution:
    • Recapitalisation of public sector banks.
    • More capital to banks outside the PCA framework
  • EMPLOYMENT GROWTH
  • inadequate growth of employment.
  • no correspondence between growth and employment.
  • Solution:
    • new investment needed for increase in employment.
  • EXTERNAL SECTOR
  • What happens in the rest of the world affects India’s growth.
  • Value of the rupee plummeted and capital outflows occurred.
  • Solution:
    • Strong growth in exports to manage CAD.
    • Contain some of our large imports.
    • A watch on India’s CAD is needed.
  • AGRARIAN DISTRESS
    • There has been fall in prices of agricultural products.
  • Solution:
    • Government should buy off the surplus.
    • Arrangements to procure and store are required.
    • Increasing productivity.
    • Increased output and better prices.
    • Consolidation of small landholdings.
    • Marketing of agriculture produce