The term “Indian economy” refers to the economic system of India, which is one of the largest and fastest-growing economies in the world. Ranked as the fifth-largest by nominal GDP, India is an emerging economic powerhouse with a diverse economic structure. As a developing country, India follows a mixed economy model, incorporating both public and private sector elements. While the government plays a significant role in regulating and overseeing essential sectors like defense, infrastructure, and transportation, it also encourages private enterprise and foreign investment to drive growth in other industries.
Historically, India’s economy was predominantly agrarian, with a large portion of the population engaged in agriculture. However, over the past few decades, the country has undergone significant economic transformations. This change was marked by the liberalization of the economy in the 1990s, which opened up markets, reduced trade barriers, and attracted foreign direct investment (FDI). These reforms played a key role in integrating India into the global economy and propelled growth in sectors such as technology, manufacturing, and services.
The services sector, particularly information technology (IT), telecommunications, and business process outsourcing (BPO), has emerged as a cornerstone of the Indian economy. In parallel, India’s industrial base has also expanded, with key areas like automobile manufacturing, pharmaceuticals, and steel production contributing to its development. This growth is further fueled by India’s large and growing domestic market, driven by an expanding middle class, rapid urbanization, and a young labor force.
India’s trade relations have evolved over the years, with significant partnerships formed with countries such as the United States, the European Union, and China. However, India faces a growing trade imbalance with China, importing more than it exports. Additionally, the depreciation of the Indian rupee has led to challenges like inflation and rising import costs.
GOI must print money. thats the way to infuse funds for survival and business continuation. Assuming 10 crore tax payers. This year could become 8 cr tax payers, thats fine. but earners have lost jobs, spending is at its lowest, production can revive with spending. There is a huge population at middle and lower end of the pyramid who are at the edge already and are in.huge debts.. They will survive next 3 months on this money supply. All production can be consumed internally, exports too will.be consumed internally. Govt can benefit 30 crore families to.the extent of its percapita income atleast this year.. through direct transfer or special cards can.be issued. Also Govt can charge 2% fees/interest for 3months. And the amount thus received must be paid back in inatalments..
An excellent article which closed on a pessimistic note:…….”A relatively low-income economy going through disruption and turmoil will extract its price, and those on the margin with no reserves will pay most of it. Is there any other way? I would doubt it. To pretend otherwise would be escapism”.
Certainly there are other ways, but it will need OUT-OF-BOX thinking to reach it.
The following are the action points which can help the economy to be revived in a painless manner.
1) Channelising the potential of Farmer Producer Organisation (FPO) for the revival of agriculture and rural livelihood sectors. The rural sector holds the key to get the economy back on track, create employment, generate forex and this can be done only through a cluster approach (or the FPO)
2) Increasing the liquidity in the market so as to create demand and revive the production and supply chains
3) Restoring the health of the Banks by tweaking the Prudential NPA norms
If anybody is interested to know more about these, please drop me a mail on shaji_99@rediffmail.com or on my Whatsaap 9425301164
Dear Mr Ninan, Please explain what would be the consequences if more money is printed,. If more money is printed and used for developmental projects, generating crores of jobs, what is the wrong. The need of the hour is massive job creation which will give a dignified livelihood for people at the bottom of the pyramid. Corporate sector of all hues must cough up 95% of their net profit to the Government coffer – for this year only. That will add trillions of rupees which the govt can use for creating job opportunities
a k pattabirman, chennai
There is a massive disruption in the business and economic cycle and to set it right huge amount of money will have to be injected in the system.
THE QUESTION IS HOW MUCH ? No one can know for sure, but the starting point for arriving at a number must be the view that the International Monetary Fund is way off the mark in its forecast that economic growth for India this year will be 1.9 per cent.
All the experts writing about it have a over view, a bird,s eye view but nobody seem to be willing to put a figure to it. They are expert at telling us what is not correct but will not even hazard a guess at what could be correct.
During the world war II there was a massive destruction , surely in the pages of history there must be a number available of it, not in the percentage of GDP but a number.
OR ARE WE AGAIN AT THE SAME GAME OF MANAGING WITHOUT MEASURING? perfect for politicians not for economists.
Mr. Ninan is deliberately vague I guess. He does not state at what level of printing money will a developing economy get into trouble unlike a developed economy. He is also ideological by stating that at per capita income of $2000 one cannot have a welfare state. Totally clueless.
In fact, corona crisis is the best opportunity for Modi to fundamentally restructure the economy completely. He should go for bold simplification and reduction in direct and indirection taxes making Indian industry globally competitive, go for agricultural land leasing reforms and reduce water intensive crops like rice and wheat and encourage cultivation of millet, remove all subsidies and make one DBT scheme for the poor, reduce administrative expenditure of GOI by 25% minimum (including salary reduction for next 3 years), reduce higher education costs by reduced funding for central universities, special ones like JNU, Jamia AMU, IITs IIMs etc, introduce massive online education for all in non-science streams etc., open foreign investments in all sectors, ease of doing business etc.
He should not use deficit financing for spending on new measures while keeping existing structure in tact but forgo existing revenues and reduce existing costs and free up everything to achieve a world competitive economic structure, Sell of PSUs and PSBs and have a risk free saving and fixed deposit facility as direct borrowing from public. This will enable him to free up PSBs and he can always have special schemes for MSME financing.
Inflation and currency will get hit anyways as a result of deficit financing but he should use the option suggested above to bring about a fundamental reforms at one go. This will be politically acceptable today as it will be without anyway reducing spending on the poor..
Reduction of salary for govt servants is not the answer. Reduction of salary of over paid company executives, confiscation of excess income by doctors, lawyers, CAs, Contractors should be in order. It is where the money lies – and it is where the govt should look for money for developmental expenses.
a k pattabiraman, Chennai
You can print money by selling Rupee bonds, if investors are found. Hopefully growth is the way out in the medium term
At the present level the economy will get revived in 36 months. India has multiple options and talents. This is the time for segment consolidation and development. Printing money is a suicidal policy.
Bitten the bullet at last. Irresponsible act.
Sane words. But they’ll fall on deaf ears. We have a leader who goes by instinct and cold calculation – how to keep himself in power.
As usual, Mr Ninan is very measured with his words. The only question remains to be answered is as to much printing of notes will be required.
India spends roughly 8% of total economoy to pay salaries to central and state employees! Total economy of the order of 10 trillion Rs, why not make a 10% cut for next 12 months? In the end, we are comparing 10% cut of permanent job salaries to job and livelihood looses of crores!
At last, the government has done the unthinkable and unpardonable – printed money, instead of creating wealth. Too much money chasing too few goods. Irresponsible conduct. It will hurt the consumers.
An excellent analysis. Covid-19 is still a developing pandemic. How it would pan out in the coming months, no one can guess. I opine that the package should not be released in one go, but should be distributed over a period of time in stages. Economic consequences of the pandemic are quite frightening and present a Hobson’s Choice. Runaway inflation spiral is one of the possible scenarios. RBI should be vigilant to avoid such a calamity. More likely scenario in India could be stagflation: economic stagnancy with persistent inflation. But the current situation is such that we will have to devise and implement a stimulant package of a very large size. There is no escape.