2017-2018: Faltering Economy

  • Central government to take measures in the rise of weak and faltering economic numbers.
Key Points:
  • Capitalising on stable macros to push through tough structural reforms is the need of the hour.
  • Finance ministry to boost the fiscal spending to the tune of ₹50,000 crore or more to make up for lack of private investment.
Facts and Figures:
  • The gross domestic product slowed to a multi-year low of 5.7% in the first quarter of 2017-18, and industrial output growth dropped to 1.2% in July, compared to 4.5% a year earlier.
  • The retail price inflation jumped to a five-month high of 3.36% in August from 2.36% in July.
Causes behind the sluggish figures:
  • The demonetisation of high-value rupee notes in November and
  • The implementation of the Goods and Services Tax
Situational Analysis:
  • Increased fiscal spending to provide short-term relief to this problem, as it will not address any of the production bottlenecks in the economy.
  • Any relaxing of the fiscal deficit target will affect India’s standing among global investors.
Reasons to the current slowdown
  • Investors capital on large-scale projects needed to boost growth was held back due to the rigidities in land and labour.
  • The unease involved in doing business in the country and the even larger uncertainty looming around the rules that govern the conduct of business have seriously held back growth.
  • The private investment has failed to make sufficient use of the country’s relatively high private savings rate.



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