EDITORIALS THE HINDU DAILY IMPORTANT EDITORIALS 14/AUG/2018PART-2 PRESENTED BY ISHAN (EDUCATOR ON UNACADEMY)
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Growth may pick up, but concerns remain How to move a mountain
Growth may pick up, but concerns remain India may well dock the highest growth rate gobally, but more isneeded to create jobs and reduce poverty rer2.Growth may pick up, but concerns remain ToplC-Gs Prelims.GSM3 e ontext- India may well clock the highest growth rate globally, but more is need ed to create jobs and reduce poverty. 14% PIC CREDITTHE HINDU Page-8
2.GROWTH MAY PICK UP, BUT CONCERNS REMAIN .With more than one quarter of the year and two months of the monsoon over, it is time to take a look at what the whole year is going to be like. Are there signs of recovery? If there are, are they robust? What are the short and medium term concerns of the country?
SECTORAL TRENDS The monsoon has been somewhat below expectations- the overall rainfall deficiency was 3% (as of July 25). Though it may seem negligible,it has to be noted that there were I I meteorological divisions (of a total of 36) which were deficient. The area sown has come down. Rice producing Bihar, for instance,has been severely affected. However, the monsoon can pick up.There is no consensus on the future behaviour of the monsoon Agricultural growth may at best be equal to what it was last year-3.4%. The services sector may perform better because public expenditure will be maintained at a high level. This is to be expected,as this happens to be the year before the elections.
As for the industrial sector, we have data for the Index of Industrial Production (IIP) for the first quarter. They show substantial improvement over the corresponding period of the previous year. It is important to remember that the correlation between the IIP and national income data on manufacturing is poor. Some sectors (automobiles and railway freight traffic) in the first quarter have done well The combined revenues and profits of 370 large companies have shown better performance in the firs quarter even though they are on a weak base. The problems of the goods and services tax (GST) may have been largely overcome, but it is still a work in progress. A pickup in the growth rate in the manufacturing sector is likely.
Looking at the overall GDP after several quarters of low growth, there was a strong pickup in the last quarter of 2017-18. If this momentum is maintained, the growth rate (2018-19) will certainly be above 7%. How much higher above 7% will depend on a number of factors. International financial institutions have forecast a growth rate of 7.3%. The Reserve Bank of India (RBI) expects it to be 7.4%. However, we need to take note of certain concerns that can come in the way of faster growth.
EXTERNAL ENVIRONMENT.. The external environment is far from reassuring. Trade wars have already started and can get worse. . The U.S. has raised duties on several products such as steel and . In turn, China has retaliated. India has also been caught in this exchange. . Besides these, there are country specific sanctions such as those against .India benefited from the fall in crude prices earlier but this position has aluminum, and on certain products imported from China. It is difficult to forecast how much worse this will become. Iran, which have a direct impact on crude oil output and prices. reversed. There has been some lull in crude prices.As a net importer, India's balance of payments can take a beating if crude prices rise again.
India's current account deficit was as low as 0.6% of GDP in 2016- . It rose to 1.9% of GDP in 2017-18, mainly because of crude price rise. India's trade deficit has always remained high. In 2016-17, the merchandise trade deficit was 4.8% and rose to 6% of GDP the next year. The answer lies in raising our export growth which has shown severe swings in recent years. It is partly a reflection of world trade.The fall in crude oil prices had also affected our export growth earlier. . In 2017-18, India's export growth rate was 9.78% There is an inescapable need to raise our export growth rate.
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