Published : Monday, 27 October, 2014 02:30 PM
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India is set to become a $2 trillion economy
According to the latest report titled ‘World Economic Outlook’ released by International Monetary Fund (IMF), India is set to become 2 trillion dollar economy in the current fiscal. The data from IMF shows that Indian economy is set to be worth $2.05 trillion this year, increasing its size from $1.88 trillion in 2013.
International consultancy Nomura has also predicted India to cross 2 trillion this year after being stuck in the USD 1.8-1.9 trillion ranges for the last three years. During these years, on one hand, economy grew at slower pace due to various internal and external factors, depreciation of Rupee against Dollar did not let the economy reach 2 trillion figure.
Now with growth back on track and reforms on the anvil, not just two trillion but even three trillion is not far from the sight. In fact, by the fiscal year 2017, Nomura predicts India to reach 3 trillion marks. However, IMF in its report has predicted India to reach three trillion marks by 2019.
India became the trillion dollar economy in 2007 year after witnessing high growth during tenth five year plan (2002-07) and within seven years after that, India increased its GDP by another trillion and had the potential to add another trillion within next three years.
Now with growth back on track, stabilization of Rupee, labour reforms initiated, policy paralysis a thing of past, there is no element of doubt that India would be the two trillion economy making it the seventh largest economy of the world in nominal terms.
However, for a bigger economy, challenges would also be bigger. For instance now it would be more important to ensure just distribution of income otherwise income inequalities will rise further. Increase income inequalities are the major reasons of unrest in the society.
Indian is the second most populated country of the world, abode to around 1.22 billion people. For such a large number of people, even a two trillion GDP would not be able to make substantial progress in per capita income which was around $1500 annually in 2013. In order to make life of every individual better, population control is also necessary to make the fruits of growth percolate to the lowest strata.
Another challenge is to ensure that inflation remains within the confines and controllable. If inflation rises unbridled, there would no meaning of becoming a two, three of four trillion economies if the prices are also rising exponentially and eroding the value of money.
A check on prices will help in increasing the real income of the people, not just nominal one. After ensuring the equal distribution of income and check on prices, authorities need to improve the productivity in the country. Productivity can be improved by keeping the workforce healthy and imparting new skills to them which are dovetailed with the requirement of the modern industry.
Fourth important challenge would be crippled infrastructure of the country. Infrastructure of the country has perpetually been in shambles and the trend needed to be broken. Improved infrastructure right from high rises in Mumbai to the village in Kala Handi district of Odisha would insure that every individual of the country is developing and enjoying the fruits of growth.
Indeed the two trillion Dollar will be an important milestone in the growth story of Indian economy, it is also true that it is just a number and real growth means something only if it is able to make a change in the life of an average individual. Therefore, now it is more important for the government to improve the channels where this rise will increase the purchasing power of the person at the bottom of the ladder.
Increase in purchasing power will increase the demand which will induce the increase in supply. All this factors will start a virtuous cycle of improved growth, increased demand, increased investment and increased income thus initiating the self-sustaining cycle of development.
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