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State of Economy: The Macro Parameters
Context:
For the Indian Economy to achieve 7% growth rate on continuous basis 5 important macro Parameters need to be in good shape
The Five macro Parameters present state:
Debt-GDP Ratio: According to the World Bank and IMF, India’s debt-GDP ratio is over 82%, one of the highest levels ever. It peaked at 89% during the pandemic and has stayed above 80% since, compared to the 83% peak in 2003.
Government Steps to Lower Debt- GDP ratio:
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Current Account
Government Steps to Lower Current Account Deficit
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- Exports: India’s exports fell from 25% of GDP in 2013 to 22.8% in 2024 .
- Merchandise exports grew at a CAGR of just 3.3% from FY15 to FY24.
- Imports: Import growth (especially crude oil, electronics, gold) outpaces export growth, with imports growing at a CAGR of 4.67%.
- Capital Flows: Capital transfers grew at a CAGR of 5.58%, but this isn’t enough to claim significant improvement.
- Overall: The current account deficit has stayed between 1-2% of GDP for the past decade.
Banking System
Banking System Reforms
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- The clean-up of the banking system was a one-time fix, not a fundamental change.
- Corruption and Accountability: Corruption in loan sanctioning, behest lending, and weak accountability remain major issues. Previous bad loans were never properly addressed, and trillions of rupees have been written off.
Fiscal Deficit
- The fiscal deficit was 5.63% of GDP in FY24, higher than at any time between 2012 and 2019, indicating no fundamental improvement in financial strength.
- Control over the deficit is achieved through cuts in capital or revenue expenditure rather than sustainable measures.
Steps taken to control Fiscal Deficit
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Inflation
- While official inflation is reported as low, real inflation on the ground, especially food inflation, is almost in double digits. The low official inflation figures are partly due to low oil prices, which India cannot control.
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Steps taken by the government to control Inflation:
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- Monetary Policy by the RBI
- Food Inflation Control
- Energy Price Stabilisation
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The Source’s Authority and Ownership of the Article is Claimed By THE STUDY IAS BY MANIKANT SINGH
