Q. 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. (2019, 10 Marks)
Introduction
Steady GDP growth and low inflation are important macro-economic achievements for India, but whether they alone place the economy in “good shape” depends on their impact on employment, investment, livelihoods and overall welfare.
Arguments in Support of the View
1. Macroeconomic Stability Achieved
- Low inflation reflects effective monetary management and improves purchasing power.
- Stable growth reduces uncertainty for investors and businesses.
- Strengthens India’s credibility in global markets.
2. Improved Consumer Confidence and Demand
- Lower inflation protects real incomes, especially for the poor.
- Encourages consumption, a major driver of India’s GDP.
3. Better Investment Climate
- Predictable growth and price stability attract domestic and foreign investment.
- Supports long-term industrial planning and infrastructure expansion.
4. Fiscal Space for Government
- Lower inflation reduces interest burden.
- Higher growth boosts tax revenues, enabling higher spending on welfare and development.
Arguments Against the View (Limitations)
1. Weak Employment Generation
- Growth has been largely jobless, especially in manufacturing.
- Unemployment and underemployment remain serious concerns.
2. Stressed Investment & Credit Cycle
- Private investment remained sluggish due to NPAs and corporate balance-sheet stress.
- This weakened long-term growth momentum.
3. Agrarian Distress Persisted
- Farm incomes remained volatile despite low inflation.
- Rural distress weakened inclusive growth and demand sustainability.
4. Uneven Sectoral Performance
- Growth concentrated in services and a few urban sectors.
- Informal sector, MSMEs and rural economy lagged behind.
5. Rising Inequality
- Benefits of growth were unevenly distributed.
- Weakens the social foundation of economic “good shape”.
6. External Sector Vulnerabilities
- Trade deficits and dependence on global financial flows increased exposure to shocks.
Balanced Assessment
- Steady growth + low inflation are necessary conditions for a healthy economy.
- But not sufficient without strong employment creation, investment revival and inclusive income growth.
- True economic strength requires macro stability + structural + social resilience.
Conclusion
While steady GDP growth and low inflation provided macro-economic comfort to India, the economy could be said to be in genuinely “good shape” only when this stability translated into jobs, income security, investment revival and inclusive growth.
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