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Source: The post is based on the article “High Growth … But Do More” published in The Times of India on 4th January 2023.
Syllabus: GS 3 – Indian Economy and issues relating to planning, mobilization, of resources, growth, development and employment.
Relevance: About the status of the Indian economy.
News: Lower-middle-class households are on their edge because of the pre-pandemic economic slowdown. Now, they have been forced by the pandemic to sell their property and borrow for consumption.
What do the various data show on the status of the Indian economy?
Data on buying
Data from SIAM shows that domestic two-wheeler sales, bought by lower-middle-class, have fallen by 36% since 2018-19 and are now back at 2012-13 levels.
The sale of domestic passenger cars, typically bought by upper-middle-class households, fell only by 9% over the same period. And luxury car maker, Mercedes Benz, reported a 64% increase in sales in the first nine months of 2022 over 2021, and expects to match or surpass its 2018-19 sales record.
Overall, the lower the income of the household, the more severe the demand.
Data on borrowing
RBI’s monthly bulletin indicates that commercial bank loans against gold jewellery increased by a huge 218% between February 2019 and August 2022.
This suggests that households across the board were borrowing to support consumption.
Data on selling
According to the National Family Health Survey, average land holdings were 22% lower in the latest round (2019-21) compared to the 2015-16 round.
This suggests that the poorest landowners seem to be engaged in substantial distress sales in recent years.
|Read more: External risk factors for the Indian economy: Global storm: Overseas risk is main policy challenge|
Other stress indicators of the economy
Labour market: Labour share in agriculture has increased over the last few years, in contrast to the steadily shrinking share before that. The demand for “last resort” MGNREGA jobs has increased from 1. 64 crores in 2015 to 3. 07 crores in 2022
This shows India is not creating enough jobs in manufacturing and services.
Corporate balance sheet: Large corporations have cleaned up their balance sheets, as have banks.
What are the opportunities for reviving the Indian economy?
a) As global supply chains look for alternative suppliers outside China, India could benefit, b) Indian services exports may grow significantly as new technologies to provide services have emerged, and c) Government infrastructure spending is good. But it can be enhanced further.
|Read more: Post-pandemic surprises and where the indian economy truly stands today|
How India can revive the Indian economy?
Limit the long-term consequences of the damage: This can be done by ensuring children in government schools have access to remedial tutoring so that they can make up for learning losses.
Implement reforms on the business environment and tariffs: This can ensure investment pick up in both foreign and domestic to create jobs. Only with more high-quality jobs, India can restore health to the lower-middle class, without which India cannot achieve our collective dream of prosperity.