GS3 PYQ (Mains Answer Writing): Gross Domestic Product | Indian Economy for UPSC CSE PDF Download

Do you agree with the view that steady GDP growth and low inflation have left the Indian economy in good shape? Give reasons in support of your arguments? (UPSC MAINS GS3 )

Introduction: GDP & inflation

• After the Subprime Crisis in the USA during 2007-08, India saw its GDP growth rate drop to around 5%, while inflation rose to double digits.
• Since 2016, the Reserve Bank of India (RBI) has effectively managed the Consumer Price Index (CPI) inflation, keeping it between 2% and 6%.
• During this time, India's GDP growth rate has remained stable, fluctuating between 6% and 8%.

Body: Economic health is not in good shape

• Twin Balance Sheet Syndrome (TBS) and Non-Performing Assets (NPA)
•  The ILFS and NBFC Crisis
•  Comparison of OPEC oil cuts and imports
• Protectionism versus Exports
• In 2018, the Rupee weakened significantly against the Dollar, reaching 74 Rs per dollar. A weak rupee is usually seen as beneficial for exports, but due to protectionism, this advantage is not fully realized.
• The Agriculture and Food Sector is facing challenges, with a deflationary trend causing issues for farmers.
• There has been a rise in agitations concerning farm loan waivers in recent years.
•  The unemployment rate is at a historic high, the worst in the last 40 years, according to the latest report from NSSO.
• There has also been an increase in agitations related to reservation demands recently.
• After demonetization, the number of people paying taxes has gone up, but tax collections have not seen a similar increase. Many individuals are not fully reporting their incomes, which is causing the government to struggle with its Fiscal Deficit Targets. As a result, deadlines for these targets have been pushed back to 2020 and beyond.
•  In August and September 2019, the government introduced several fiscal stimulus measures mainly due to a slowdown in the automobile sector. If the economy were performing well, such measures would not have been necessary.

Conclusion: Finding: why you disagree with Q statement

 Despite steady growth in GDP and low inflation, the Indian economy cannot be considered in good shape due to several challenges such as:

• Protectionism and External Factors
• Issues in the Banking and NBFC Sector
• Insufficient Growth in Revenue Collections and Consumer Demand