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GDP
Introduction The Indian economy remained resilient with a robust 7.6% growth rate of GDP in FY 2023-24, positioning itself among the fastest-growing major economies. However, this economic success has not translated proportionally into human development gains, as evident from India’s low ranking inRead more
Introduction
The Indian economy remained resilient with a robust 7.6% growth rate of GDP in FY 2023-24, positioning itself among the fastest-growing major economies.
Body
Reasons for the Disconnect Between GDP Growth and Human Development
Measures to Ensure Inclusive Development:
Conclusion
Achieving high GDP growth alone cannot address the complex social challenges India faces. By investing in human capital, bridging regional inequalities, promoting sustainable development, and ensuring social security, India can achieve a more inclusive development model.
See lessHow rising inflation would lead increase in India's GDP?
Firstly we understand how inflation measured. Inflation is measured by comparing the cost of things today with how much they cost a year ago. Rising inflation means pricing of the good and services are increasing continuously or fast change. So rising inflation can have both positive and negative imRead more
Firstly we understand how inflation measured. Inflation is measured by comparing the cost of things today with how much they cost a year ago. Rising inflation means pricing of the good and services are increasing continuously or fast change. So rising inflation can have both positive and negative impact on India’s GDP.
Positive impact depends on the economic environment, here is your answer:-
a) Rising wages: There is a tendency of producing an inflationary wage-price spiral. Employees call for increased salaries to cope with increased expenses, employers increase the prices of goods and services in order to recover increased expenses.
b) Impact on Markets: When inflation is high the stock price is thus low , while conversely the value of gold is high. lawsuit and resulted in higher interest rates.
c) Increased consumer spending: Inflation has dire consequences in that average prices of goods or service will go up. This can lead to consumer will spend more money in the present. Then more contribution to consumer spending has led to increased contribution to the GDP.
d) Increasing business investment: When prices are high there are big probabilities that many authorizations will employ more in production capabilities, hire more works. This will boost the economy.
e) Government revenue increases: When prices increase then the more revenue returns to government account through sales tax, Goods and services tax, tax deducted at source and other taxes. This revenue will in turn be used by government to construct more infrastructure in developing their project and social welfare.
See lessWhy GDP is not considered as a good form of indicator of economic welfare ? What additional factors can make it a better indicator for economic welfare?
GDP (Gross Domestic Product) measures the total value of goods and services produced in a country, but it is not a perfect indicator of economic welfare. While GDP reflects the size of an economy, it doesn't account for the quality of life or well-being of the people in that economy. ### LimitationsRead more
GDP (Gross Domestic Product) measures the total value of goods and services produced in a country, but it is not a perfect indicator of economic welfare. While GDP reflects the size of an economy, it doesn’t account for the quality of life or well-being of the people in that economy.
### Limitations of GDP:
1. **Income Inequality**: GDP doesn’t show how wealth is distributed. A country can have a high GDP, but if the wealth is concentrated in the hands of a few, many people may still live in poverty.
2. **Non-Market Activities**: GDP ignores non-market activities like volunteer work, household labor, and caregiving, which contribute to well-being.
3. **Environmental Impact**: GDP does not account for environmental degradation or resource depletion. Economic activities that harm the environment might increase GDP, but they reduce long-term welfare.
4. **Quality of Life**: GDP doesn’t measure factors like health, education, happiness, or work-life balance, which are crucial to overall well-being.
### Additional Factors for Better Measurement:
1. **Income Distribution**: Including measures of income inequality would give a clearer picture of how economic benefits are shared.
2. **Environmental Sustainability**: Indicators that account for environmental health and sustainable practices would reflect long-term welfare.
3. **Quality of Life Metrics**: Including factors like life expectancy, education levels, and happiness would provide a more comprehensive view of economic welfare.
Incorporating these factors would make GDP a better indicator of economic welfare, reflecting not just economic activity, but also the overall well-being of a society.
See lessHow rising inflation would lead increase in India's GDP?
Rising inflation is typically associated with negative economic consequences, such as decreased purchasing power and higher costs of living. However, under certain circumstances, it could potentially lead to an increase in India’s GDP. Here’s how this might happen: 1. Increased Nominal GDP: Higher PRead more
Rising inflation is typically associated with negative economic consequences, such as decreased purchasing power and higher costs of living. However, under certain circumstances, it could potentially lead to an increase in India’s GDP. Here’s how this might happen:
1. Increased Nominal GDP:
2. Boost to Certain Sectors:
3. Government Revenue and Fiscal Stimulus:
4. Encouragement of Investment:
5. Export Competitiveness:
Important Considerations:
- Inflation Control: Persistent high inflation can have adverse effects, such as eroding consumer purchasing power, increasing production costs, and potentially leading to economic instability. The benefits mentioned above are often short-term and contingent on effective monetary and fiscal policies.
- Quality of Growth: While nominal GDP might increase, real GDP (adjusted for inflation) may not grow if inflation outpaces economic productivity. Sustainable growth typically requires balancing inflation with productivity improvements.
See lessPolitical economy
The relationship between politics and economics in India is deeply intertwined, influencing and shaping each other in significant ways. This linkage is evident in various aspects of governance, policy-making, and development. Here’s a detailed analysis of how politics and economics are interconnecteRead more
The relationship between politics and economics in India is deeply intertwined, influencing and shaping each other in significant ways. This linkage is evident in various aspects of governance, policy-making, and development. Here’s a detailed analysis of how politics and economics are interconnected in India, supported by recent examples:
1. Political Influence on Economic Policy
Policy Formulation and Implementation
Economic Reforms and Political Decisions: Political priorities often shape economic policies. For instance, the economic reforms of the 1990s were driven by the political need to address the balance of payments crisis and revive economic growth.
Recent Example: The Goods and Services Tax (GST) implementation in 2017, a significant economic reform, was influenced by political decisions aimed at simplifying the tax system and improving compliance.
Budgetary Allocations
Political Priorities in Budgeting: Government budgets reflect political priorities, with allocations often driven by electoral considerations and political promises.
Recent Example: The Union Budget 2024, with increased allocations for social welfare schemes and infrastructure projects, demonstrates how political agendas impact budgetary decisions.
Election Strategies
Economic Policies as Electoral Tools: Economic policies are frequently used as tools for electoral gains, with governments implementing welfare programs and subsidies to garner voter support.
Recent Example: The Pradhan Mantri Kisan Samman Nidhi (PM-KISAN) scheme, which provides financial support to farmers, was introduced ahead of the 2019 general elections to appeal to the rural electorate.
2. Economic Impact on Political Stability
Economic Performance and Political Popularity
Economic Growth and Electoral Success: The performance of the economy can significantly impact political stability and electoral outcomes. Economic growth often translates into political support, while economic downturns can lead to political discontent.
Recent Example: The economic slowdown during the COVID-19 pandemic and its impact on unemployment and business closures affected the political narrative and public perception of the government’s handling of economic issues.
Public Sentiment and Political Legitimacy
Economic Conditions and Governance: Economic conditions influence public sentiment and the legitimacy of political leaders. Governments face pressure to address economic challenges to maintain political stability.
Recent Example: The farmer protests against the farm laws in 2020-2021 highlighted how economic issues and dissatisfaction with agricultural policies can lead to significant political unrest.
3. Economic Policies Shaping Political Landscape
Regulatory Changes and Political Agendas
Economic Reforms and Political Ideology: Economic reforms often align with the political ideology of the ruling party, shaping the economic landscape according to their vision.
Recent Example: The National Monetization Pipeline (NMP), aimed at privatizing state-owned assets, reflects the current government’s focus on market-driven economic policies and liberalization.
Infrastructure Development and Political Gains
Infrastructure Projects as Political Capital: Major infrastructure projects are frequently used to build political capital and demonstrate governance achievements.
Recent Example: The Delhi-Mumbai Expressway and Ganga rejuvenation projects are promoted as significant achievements of the current government, aimed at improving connectivity and environmental conditions while gaining political favor.
4. Interaction Between Politics and Economics in Policy Challenges
Policy Implementation and Administrative Capacity
Challenges in Execution: The effectiveness of economic policies often depends on political will and administrative capacity. Political factors can either facilitate or hinder policy implementation.
Recent Example: The implementation challenges of the National Education Policy (NEP) 2020 reflect how political decisions and administrative capacities affect the execution of educational reforms.
Corruption and Economic Mismanagement
Impact on Economic Health: Corruption and political interference can lead to economic mismanagement and inefficiencies, affecting overall economic health.
Recent Example: The Scam in the Rafale fighter jet deal raised concerns about corruption and its impact on defense procurement and overall governance.
Social Welfare Policies and Political Strategy
Linking Economic Policies with Social Welfare: Social welfare policies are designed to address economic inequalities and are often used by political parties to gain support from disadvantaged groups.
Recent Example: The Ayushman Bharat scheme, aimed at providing health insurance to low-income families, illustrates how economic policies are linked with social welfare objectives and political strategies.
5. Long-term Implications and Future Prospects
Economic Growth and Political Dynamics
Sustainable Development and Political Stability: Achieving sustainable economic growth is crucial for long-term political stability. Governments need to balance economic reforms with social equity to maintain political support.
Recent Example: The focus on sustainable development goals (SDGs) and climate action in India’s policies reflects the need to align economic growth with long-term political and social objectives.
Globalization and Domestic Politics
Global Economic Integration: India’s integration into the global economy influences domestic politics, as global economic trends and international trade agreements impact national policy decisions.
See lessRecent Example: The India-U.S. trade agreements and participation in global economic forums highlight how international economic dynamics shape domestic political decisions and economic strategies.
In summary, the relationship between politics and economics in India is deeply interconnected. Political decisions influence economic policies, while economic performance affects political stability and legitimacy. This linkage manifests in policy formulation, electoral strategies, and governance challenges, highlighting the complex interplay between political and economic factors in shaping India’s development trajectory.
how a economic structure of any country work ?
The economic structure of a country refers to the organization and functioning of its economic system, which includes various elements such as institutions, policies, industries, and the interactions among them. Here’s a breakdown of how the economic structure of a country generally works: 1. **InstRead more
The economic structure of a country refers to the organization and functioning of its economic system, which includes various elements such as institutions, policies, industries, and the interactions among them. Here’s a breakdown of how the economic structure of a country generally works:
1. **Institutions and Governance:** Countries have institutions that oversee economic activities, such as central banks, regulatory bodies, and government agencies. These institutions set policies, regulations, and laws that govern economic behavior, trade, investment, and property rights.
2. **Macroeconomic Policies:** Governments use monetary and fiscal policies to manage economic growth, employment, inflation, and other macroeconomic indicators. Monetary policy involves actions by central banks to control money supply, interest rates, and inflation. Fiscal policy refers to government spending, taxation, and borrowing to influence economic activity.
3. **Sectoral Composition:** The economy is divided into sectors such as agriculture, industry (including manufacturing), services, and increasingly, the digital economy. The sectoral composition determines the country’s production capabilities, employment opportunities, and economic growth potential.
4. **Trade and Globalization:** Countries engage in international trade and investment, influencing their economic structure. Trade policies, tariffs, and agreements impact the flow of goods, services, and capital across borders. Globalization connects economies, affecting competitiveness, labor markets, and technological integration.
5. **Labor Market Dynamics:** The labor market determines wages, employment levels, and skills development. Policies related to education, training, immigration, and labor laws shape workforce participation, productivity, and income distribution.
6. **Financial System:** Financial institutions, markets, and regulations facilitate savings, investments, and capital allocation. The financial system supports economic activities by providing credit, managing risks, and promoting financial stability.
7. **Technology and Innovation:** Technological advancements and innovation drive economic growth by improving productivity, creating new industries, and enhancing competitiveness. Governments, businesses, and research institutions invest in research and development (R&D) to foster innovation.
8. **Social and Environmental Factors:** Socioeconomic factors such as income inequality, poverty levels, healthcare, and education impact economic development and well-being. Environmental policies address sustainability, resource management, and climate change mitigation.
The economic structure of a country evolves over time due to technological progress, demographic changes, geopolitical shifts, and global economic trends. Understanding and managing these elements are crucial for policymakers, businesses, and individuals to navigate economic challenges and opportunities effectively.
See lesshow banking system of any country impact its overall GDP ?
The banking system has always been seen as the life blood of most economies of the world especially in the determination of ones Gross Domestic Product (GDP). Here's how the banking system impacts GDP: 1. Facilitation of Investments Credit Provision: Businesses get funds from banks, in form of loansRead more
The banking system has always been seen as the life blood of most economies of the world especially in the determination of ones Gross Domestic Product (GDP). Here’s how the banking system impacts GDP:
1. Facilitation of Investments
Credit Provision: Businesses get funds from banks, in form of loans, for the purposes of expansion, research and development or even for new projects. Such an investment enhances production, and since the production levels directly affect GDP rates, it can be inferred that…
Startup Financing: They also finance new ventures as these usually bring new ideas into the market and stimulate the economy and hence increase the GDP rates.
2. Consumer Spending
Personal Loans and Mortgages: Mortgages, credit cards, and personal loans are products of banks which help consumers to be able to purchase goods, pay for services and acquire shelter. Consumers spending more money means there is a higher demand for products that results to increased production and therefore gdp.
Savings and Deposits: Savings accounts and other deposit schemes are allowed by the banks and this allows people to securely keep their money. It fosters saving and makes sure that there is capital available for the farther use in investment.
3. Monetary Policy Implementation
Interest Rates: The banking system mainly help the central banks regulate interests so as to keep inflation and other instabilities at bay. The lowering of interest rates can increase the rates of borrowing and therefore spending leading to an increase in the GDP while the increase in interest rates can cause the economy to slow down if it is overheated.
Money Supply: The banking system is one of the important institutions that regulate the expansion of the quantity of money. Optimum money supply helps check whether there is enough liquidity in the economy to support business undertakings and economic growth.
4. Financial Stability and Confidence
Risk Management: Risk is minimised by diversification as well as the careful consideration of credit decisions of banks. In turn, a stable banking system promotes investors’ confidence and consumers’ confidence in investments and spending, respectively.
Financial Crises Prevention: Through competent regulation and supervision of the banks, then one can avoid financial crises that have a knock down effect on the GDP. The banking stability ensures that economic growth has constant rates rather than having fluctuations that are usually triggered by instabilities.
5. Efficient Payment Systems
Transaction Processing: The payments systems include electronic funds transfer, online payments and others and through them, banks ensure accurate and fast payment processing at the economic level. This efficiency aids trade and commerce which in turn aids the GDP.
International Trade: Through letters of credit and foreign exchange, amongst others; banks help in the execution of international business transactions. Trade activities help in the growth of GDP since a country’s tendency is to trade more than before.
6. Capital Formation
Investment Vehicles: Banks provide several financial instruments of savings (or investment instruments like bonds, mutual funds etc. ) through which saving can be made productive. This capital formation is very essential in determining any country’s economic development and growth of GDP.
Intermediation: The financial intermediary; banks link the savers with the borrowers and help in the sound allocation of funds to productive users which in the end leads to an increase the level of productivity within the economy and the GDP.
7. Government Financing
Public Sector Loans: Banks do give out loans to governments for infrastructure development and many others expenditure. These projects can spur economic activity as well as input on the Gross Domestic Product.
Debt Management: Banks assist in the management of government’s debt in order to provide for vital services and funding of projects.
8. Encouraging Innovation and Entrepreneurship
Funding for Innovation: Hence, banks fund innovative ideas and business start-ups, which in the long run could bring about new production lines and or services and products in technologies. it promotes efficiency and development which enhances the Gross Domestic Product.
Support for SMEs: For instance, SMEs require funds from the banking sector to finance their operations; these firms are usually major employment generators and contributors to a country’s GDP.
9. Employment Generation
Direct Employment: First, operating directly in the economy and country, banks provide a lot of jobs to many people.
Indirect Employment: Through extension of credit to business, banks contribute to the creation of employment opportunity in the various sectors of the economy and hence the GDP is boosted.
10. Outcome on Real Estate and Construction
Housing Loans: They operate with money through offering credit especially for buying of houses known as mortgages, which has an impact on housing segment like construction outfits, real estate firms, and home enhancing companies. These sectors play a contribution towards the GDP in the country.
To sum up, the banking system influences GDP in many aspects, such as investment promotion, consumption, operations of monetary policy, maintaining financial stability, payment systems, capital formation, government borrowing, creation of favourable conditions for innovations, employment, and supporting the real estate and construction industries. In this respect, it is pivotal to stress out the role of efficient and sound banking institutions as prerequisites for the economic growth and overall increase in the GDP.
See less