[op-ed snap] Revival risks

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Mains Paper 3: Economy | Development and employment

From UPSC perspective, the following things are important:

Prelims level: Not much

Mains level: Briefly explains current position of Indian Economy


News

Positive things happening in the India Economy

  1. Improvement in India’s rank on a World Bank index for ease of doing business
  2. The economy is seeing a growth of 6.3% in the second quarter of this year, after slowing for at least four quarters

Is economy fine now?

  1. The official data for the third quarter (October to December) so far suggest that the economy is still facing some issues such as rising oil prices

Growth data of different sectors

  1. After two months of robust 4%-plus growth, industrial activity however slipped in October
  2. This coincides with exporters seeing a 1.1% slump in shipments in October
  3. The IIP has now grown just 2.5% in the first seven months of 2017-18, compared to 5.5% in the same period last fiscal

What is the cause of concern?

  1. With exports,  job creation still needs to pick up
  2. and the latest inflation data set too is cause for concern
  3. Prices at the consumer level rose at the fastest pace in 15 months this November, with inflation touching 4.88%
  4. There is greater concern about the rise in core inflation (excluding food and fuel) and inflation imported through high global prices

Difficulty for Government

  1. The government faces difficult choices
  2. Slashing fuel taxes could calm inflation, but it would hit revenue collections that are already uncertain owing to GST deadline extensions
  3. Not doing so would leave less room for the central bank to lower interest rates
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