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Roadmap for Answer Writing 1. Introduction Objective: Introduce the topic of GDP growth and inflation in the Indian economy. Key Point: State the importance of analyzing whether steady GDP growth and low inflation indicate a healthy economy. 2. Arguments Supporting the View A. Strong GDP ...
Model Answer Introduction The Indian economy has transitioned from high inflation to a more stable and lower inflation rate, coinciding with steady GDP growth over the past five years. This trend raises the question of whether these factors signify a healthy economy. Reasons Supporting the View 1. SRead more
Model Answer
Introduction
The Indian economy has transitioned from high inflation to a more stable and lower inflation rate, coinciding with steady GDP growth over the past five years. This trend raises the question of whether these factors signify a healthy economy.
Reasons Supporting the View
1. Strong GDP Growth
India has experienced an average GDP growth of around 7% per annum over the last decade, making it one of the fastest-growing economies globally. This growth has contributed to job creation and significant poverty reduction, indicating a robust economic environment.
2. Low Inflation
Low inflation rates foster economic stability, encouraging savings and investment. The Monetary Policy Committee (MPC) has effectively maintained price stability, ensuring that consumer purchasing power remains intact.
3. Policy Stability
Steady growth and low inflation create favorable market conditions for investment and production planning. This stability is crucial for enhancing business confidence and attracting foreign investments.
Points Against the View
1. Low Demand Indicators
While low inflation can indicate stability, it may also reflect weak demand, adversely affecting industrial output. This disconnect can hinder overall economic health.
2. Investment Reduction
A contraction in consumption has limited further investment opportunities. Falling consumption patterns directly impact corporate revenues and investment decisions.
3. High Unemployment
Despite steady growth, unemployment rates have reached a 45-year high, indicating that growth has not translated into sufficient job creation.
4. Double Balance Sheet Problem
Many corporates face revenue shortages, complicating their ability to repay debts and contributing to rising Non-Performing Assets (NPAs) in the banking sector. This issue hampers economic growth potential.
5. Unequal Growth Distribution
The benefits of economic growth have not been evenly distributed, leaving significant portions of the population in poverty and widening the gap between the rich and poor.
Conclusion
While steady GDP growth and low inflation suggest a positive economic outlook for India, underlying issues such as low demand, high unemployment, and unequal growth distribution present significant challenges. A nuanced approach is necessary to ensure that growth translates into broader economic benefits for all citizens.
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