Mrigank_Shekhar_Tripathi_B55_C1_39_BE_Assign15_week6

Question:-Amidst global turmoil including slow world output growth,

falling commodity prices, volatile exchange rates and financial markets,
India still looks promising in terms of growth. What in your opinion has
worked for the nation? Highlight the policy actions taken by the
government in this regard.
Answer:India is going to be the fastest growing economy in 2016 at 7.7 %
growth rate and having the best growth prospect in the coming decade
as predicted by the economist. Growth in China is heading in the
opposite direction predicted to be only 6.3% in 2016 while the US will
expand by a mere 2.6%. Indias economy is the 11th biggest in the
world and is forecast to reach third, after the US and China, in less than
15 years [1].
India economy is growing at highest rate when there is trouble in global
economy, nations with same complexity as India (BRICS) are struggling
for respectable growth rate. Even though commodity prices are falling
India is able to manage the highest growth rate. Moodys has also raised
credit rating outlook for India as a healthy economy.
According to the article published in wall street Journal by Raymond
Zong If a countrys per-capita income is low relative to others at a
similar level of complexity, then that suggests there is opportunity to
grow and catch up. In India, average incomes are nearer to Sub-Saharan
African levels than to East Asian ones. The other side of the coin is that
more-advanced countries are less likely to diversify further. Germany, an
innovative industrial powerhouse, was found to be the worlds secondmost complex economy, according to 2014 trade data. But that is partly
why its projected annual growth rate through 2024 is just 0.35%, below
Cubas and Libyas. U.S. growth is predicted to be 2.6%. [2]
Impact of low Commodity Prices:
The Slowdown in china has caused steep fall in commodity prices. India
a major importer of oil and other mineral has taken benefit of cheap oil
and commodity prices. First, Lower Oil price has reduces Indias import
bill that narrowed the trade deficit. Second, it has contributed to meet
the fiscal deficit target as even after lower oil prices government has not
reduced the excise duty on petrol and diesel; contributed more indirect
tax collection. Third, lower commodity prices contributed to being retail
inflation (CPI) with in RBI target of 6% by March 2016 [3].

Mrigank_Shekhar_Tripathi_B55_C1_39_BE_Assign15_week6

Major contributor are falling Oil prices which is big win for business as
well as consumers, newly elected government pushing for major
structural reforms in taxation and business environment, thirdly RBI
governor policies attracted foreign investors and helped India to reduce
foreign
debt. Less debts, more concrete reforms and young working
population are attracting investors in India [4].
Major Policy Action Taken by the Government in this regard
1. In continuation of the process of subsidy reforms, expenditure on
major subsidies is estimated to reduce to 1.5 per cent of GDP in
2016-17 from 1.8per cent of GDP in 2015-16 RE). [5]
2. The Union Budget 2016-17 strives to balance growth-stimulating
investment thrust and structural reforms with more empowering
federalism. Rationalization of duties and tax structuring, the
introduction of the goods and services tax (GST), better targeting of
subsidies and robust efforts to step up disinvestment hold the key
to enriching the quality and sustainability of central finances. [5]
3. Expected higher public-sector investments from Government to
boost infra project e.g. road construction, laying new power lines
and upgrading the rail network.
4. Market-friendly reforms GST and ease of doing business
5. Rising wages for the government employees (7th Pay commission
& OROP) to keep Indias growth ahead of its emerging-market
peers.
6. Private domestic investment is also likely to benefit from an
accommodative monetary policy by the RBI.
7. Lifted caps on foreign investments in sectors such as insurance and
defense manufacturing.
8. Increased credit for agriculture and small industries" has facilitated
India's fast growth
9. Planning to allow more than 50 % foreign investment in railway [6]
References:[1][ https://www.theguardian.com/commentisfree/2016/feb/14/india-economy-growthwest]
[2][http://blogs.wsj.com/indiarealtime/2016/01/01/india-will-be-fastest-growing-economy-for-comingdecade-harvard-researchers-predict/]
[3][Impact of China Slowdown on India, Geetima Das Krishna Senior Researcher Centre for Policy Research
Sakshi Bhardwaj Research Associate, Centre for Policy Research Feb,2016]
[4][http://money.cnn.com/2015/04/14/investing/india-economy-fastest-growing/]
[5][Union Budget 2016-17:An Assessment; RBI Bulletin May 2016]

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