Government of India has entered into free trade agreements with many countries but most of the FTAs are not in favor country and those needs to be reviewed. From the trend line of the below graph for the period of 2008 to 2013, it is clear that country’s balance of trade situation has worsen in these years. This indicates that we have imported more from the other countries and exported less and this gap is widening although free trade agreements have been entered into with aims of plugging this gap. And this increasing gap is not good for the exchange rate for Indian rupee at all.
Monday, July 7, 2014
Sunday, July 6, 2014
Budget 2014-2015: Infrastructure, Taxes and Subsidies and Social Security Programs - Rajeev Upadhyay
Government needs to improve the overall infrastructures in the country from roads to training lines to ports. Also there are numerous infrastructure projects from sectors like power generation, roads and industrial zones etc that are pending at different stages because of leniency on the part of government. Also government needs to formulate a better policy that incentives timely execution of infrastructure projects. For this there should be efficient land acquisition and rehabilitation policy in place.
Saturday, July 5, 2014
According to the latest data available, it is clear that the investment by corporate has been falling since long and this needs to be taken care of, as without and very low of investment by corporate, government would not be able to increase growth. So the government must ensure that there are some stimuli for the corporate to encourage them to reinvest their earnings back into the economy.
Friday, July 4, 2014
At present the unemployment situation in the country is alarming, with 4.7 crore youth (between 25 and 34 years of age) unemployed. Further it is notable that there are more than 350 millions of young people who are ready to enter the job market in next few years. If not managed the so called demographic dividend may turn out to be curse for the economy. And there is only way to decrease unemployment rate and increase opportunities for jobs for young people.
India at present can use the opportunity of the large number of Chinese labour force and their rising wages to establish itself as a low cost manufacturing hub for the world. This will help us to increase share of manufacturing sector in GDP and provide more employment opportunities to millions of youth. But for this it is important that government put basic infrastructure and policy in place for training and skill building and if India wants to achieve higher growth rate and gain for demographic profile, it cannot do without proper and efficient skill building strategies. It must be ensured by the government that the training institutes are providing contemporary vocational skills and there is flexibility in curriculum, recruitment of teachers, their salaries and placement of their students so that training institutes can adjust according to needs of the market.
Thursday, July 3, 2014
Growth is another aspect of Indian economy that needs to be taken care of by the Indian government. In the last two five year plans, the average GDP growth rate in Indian economy was around 8%; however, the same is revolving around 4.5% now, which is hardly sufficient in view of the challenges faced by Indian economy. We need to accelerate growth back into the bracket of 8-10% to gain from the demographic profile of India. For this it needs to bring a lot of changes in overall economy.
From the below graph it is clear that there had been very high level of fiscal deficit and this is upsetting picture for a slowing economy. Therefore, the government instead of going for populism must ensure fiscal prudence.
The fiscal deficit must be brought around 4-4.5% or at max 5% (subjected it converts deficit into revenues) for better exchange rate and other economic parameters. From the newspaper reports about the revenues collection, the path the fiscal prudence by the government seemed to be a difficult choice by government seeing the proposed expenditures and promises made by BJP during recently concluded election as at present it does not have too much scope for higher fiscal deficit.
Wednesday, July 2, 2014
Inflation in Indian economy has been very high for long time and this is challenging for the economy as it is eroding the value of Indian rupee in national as well as international market and making life difficult for wages earners. Also considering the social and political unrest in Iraq and other West Asian nations, the problem of high inflation in Indian economy becomes more acute as oil prices would show upward trend leading to higher food and overall inflation in the economy. Government is required to take fiscal initiatives to contain as only monetary policy cannot help government in this regards. From the above graph it is clear that the average inflation during 2012 – 2014 has been around 10% and this is very high for any economy.
Food inflation in the economy is on higher side and government needs to take initiatives for agriculture sector for better results in medium to long term as no short term strategy would work for because there has huge difference in Indian society of early 2000s and today’s India. India is witnessing tectonic shift in its eating habits across the country either its metro cities or rural areas. This has resulted in changes in demand for agricultural foods but most of farmers are following and cultivating old ways and corps. Government needs to bring the required change in the overall farming sector by promoting some important and vital corps so that it does not have to depend on imports.
Tuesday, July 1, 2014
For any country, budget is an important vision document and for newly elected government perhaps the most important tool in hand to keep its people’s hopes and expectations sustained for longer time. The present day government with the help of a promising but deliverable budget can keep its own as well as its people’s morale high. Our finance minister is expected to present budget on 10th July 2014. So to keep the morale of India at higher level he must take of few issues as inflation, food inflation, growth, fiscal deficit, employment and skill building, investment by corporate, manufacturing, agriculture, infrastructure, taxes, subsidies and social security programs and free trade agreements etc.