The Central Statistics Office (CSO) has released estimates of Gross Domestic Product (GDP) for the first quarter (April-June) Q1, of 2017-18. The GDP has slowed down to 5.7 per cent, a dip of 1.5 per cent from the preceding year’s first quarter. Demonetisation and clearing of inventory by the manufacturers before the introduction of the Goods and Services Tax (GST) have been largely held responsible for hampering growth in the country. Other than these two reasons, if we need to resuscitate our economy, we need to assess and understand the other factors which have contributed in arresting our economic growth.
Fall in Exports
India had prosperous economic growth between 2005-06 and 2007-08 in spite of low domestic demand. The export grew at 20 per cent during these phases. One of the prime reasons behind this is that we have had an export-driven economy during this phase. The current crisis has been augmented due to lacklustre growth in exports and domestic demands. We should look at our glorious economic history and remodel our economy to revive the export growth.
The global economic environment is one of the biggest parameters to sustain export growth rates. Due to slump in advanced economies, there have been deficit in demands. The contributions of exports to GDP have reduced to 18.2 per cent in the first quarter from 19.3 per cent from the preceding year’s first quarter. Therefore, we need to increase competitiveness in the global market and also pull in Small and Medium Enterprises (SMEs) to play a bigger role.
Decline in Investment Rate
A good indicator of a healthy economy is ‘balanced public and private investments’. The Indian economy has been ailing because of inadequate investments. This worrisome situation has been reported in the Economic Survey several times. But there seems to be no cure at the moment. The Gross Fixed Capital Formation (GFCF) judges the net investment in the country. In terms of GDP, the rates of GFCF Q1 of 2017-18 are estimated at 29.8 per cent, as against the corresponding rate of 31.0 per cent in Q1 of 2016-17 (a decline of 1.2 per cent).
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