- The tariffs imposed by the USA have already started showing signs of hitting us, despite the Indian Union Government led by the Prime Minister making confident statements of tiding over the situation by encouraging domestic consumption. Towards this, the recent reduction in GST slabs, with an eye on providing more money to consumers to purchase domestic products, could be rightly termed one such measure. The idea behind the move is to allow Indian people to feel strengthened by more spending power, but also unambiguously nudge them to not become too conservative by opting to save further. The moot point to ponder over here is whether the strategy has worked despite whipping up the nationalistic emotions to buy local products. Let’s dwelve.
PC: The Week
- Any reasonable layman aware of the basic nuances of fiscal prudence would put across the viewpoint that the present 6-point-something GDP growth would not suffice to make India a developed country. Aspiring to become one is welcome, but what about the practicality of reaching the monumental aspiration by a mere hope rather than a real push on the ground? The fiscal experts opine that the asking rate is 12-plus now. Of course, a surplus monsoon bodes well for agriculture and rural demand this year. GST reforms, which kicked in 10 days ago, are also expected to spur consumption. So, RBI’s revised growth forecast of 6.8% isn’t surprising. It seems like a small increment from 6.5%, but each fraction matters in a $4tn economy.
PC: Mint
- Yet, it’s nothing to celebrate when Trump’s tariffs have cast a shadow over roughly $50bn worth of goods exports. Even otherwise, 6.5% or 6.8% isn’t an aspirational growth rate for India. As the finance ministry has said more than once this year, India needs to grow at 8% every year at least for a decade to become a developed country by 2047. Yes, India remains the fastest-growing major economy, but relative performance doesn’t improve living standards. In the late 1990s, when India’s population was growing at 2% per annum, economists recommended a 9% growth target for 7% effective growth to double income every 10 years. Now, although population growth has slowed to about 1% per year, 8% is the slowest acceptable GDP growth target. Not enough.
PC: Times of India
- However, even 8% might be too slow. To address the growing problem of unemployment, the asking rate must be 12.2%, it says. The report points to record youth unemployment, 17.6%, and a surge in agriculture employment, which are faces of the same coin. Growing farm employment is the clearest sign of a jobs crisis. As countries develop, agriculture’s share in employment and output shrinks. Farm work accounts for only 1.2% of employment in the US. But in India, this year’s Economic Survey showed agriculture’s share in employment increased from 44.1% in 2017-18 to 46.1% in 2023-24. Over the next 10 years, 84mn Indians, equal to the population of Germany, will hit working age. So, creating good jobs for them must be a national priority. Period.
