Tuesday, August 09, 2022

Investing in India

By The Editorial Team Updated: Sep 13, 2020 10:50 pm

Economists are divided over the steps to be taken to revive the Indian economy. While, some economists suggest that public spending be increased, others suggest that the government should print currency notes and hand it over to the common people. But both groups are realistic whilst taking into account factors involved in sending Indian economy into recession, Covid-19 is clearly not the sole reason for India’s economic state. As a matter of fact, Indian economy has been ailing for quite some time now. This is why in the quarter before Covid-19 induced lockdown, GDP recorded much lower growth rate and when the lockdown was imposed it showed a contraction of nearly 25 per cent.

The figures show that reviving Indian economy will not be an easy task. Implementing one or two cosmetic measures suggested by a couple of experts will not better the health of the country’s economy. It needs proper planning; both short and long-term. Among the short-term plans, we will have to increase demand. If Indian economy is appearing unhealthy it is because of lack of demand in the domestic market. It may be mentioned here that 70 per cent of our GDP comes from domestic demand and the loss of it will never allow the economy to regain its health. This is why some experts have advised the government to print notes. But before the government adheres to their suggestion, few doubts about the proposal should be cleared. Firstly, where is the guarantee that this step will increase demand in the domestic market? Secondly, printing notes to cover up economic deficit has always resulted in inflation. What steps should we take then?

To strengthen the economy, the country will have to adopt a cautious path which is relatively free from such dangers. The economy will get the required boost when the people will be free from any uncertainty to plan for their future. During the last couple of years, there was some instability in our economic sector. But, demonetisation or implementation of Goods and Services Tax (GST) were not behind this uncertainty. It happened because many business houses transferred their excess funds abroad without investing in India. The flight of capital has weakened Indian economy. This is why the country’s industrial growth has fallen sharply and the contribution of the manufacturing sector to GDP has gone down considerably. This trend is still continuing, as is proven by the fact that recent stimulants announced by the government didn’t help the economy at all, but the stock market is stable. It indicates that the business community in India is interested more in profit making than in investing.

In such a situation, the best way to revive the economy is to spend on infrastructure. It must be remembered that when former Prime Minister Atal Bihari Vajpayee announced the Golden Quadrilateral project, business in the country received a major boost. The need of the hour is to make similar investments in infrastructure. When infrastructure comes up, only then will investors be interested in investing. So, the government will have to set the ball rolling by increasing expenditure on infrastructure. It will ensure investments along with employment which in turn will increase demand.

By The Editorial Team Updated: Sep 13, 2020 10:50:39 pm