India’s big reform push marks a significant step towards transforming the country’s economic landscape and improving the lives of its citizens. The government is implementing a series of ambitious changes aimed at boosting economic growth, creating jobs, and enhancing infrastructure. These reforms cover various sectors, including agriculture, manufacturing, taxation, and digital services. By simplifying regulations, encouraging investment, and promoting innovation, India aims to become a more attractive destination for businesses and a stronger player in the global economy. This push for reform is designed to create a more prosperous and inclusive future for all Indians.
Tag: GS-3, Economy– Growth & Development , GS-2 – Polity & Governance- Parliament – Budget
Context:
- The upcoming 2024-25 budget presents a pivotal opportunity to articulate a clear vision and direction for the future.
- Achieving a sustained 10% real growth rate is within reach, signalling a robust economic trajectory ahead.
- Importantly, through sustaining our achievements of macroeconomic and political stability, along with a continued push to physical and digital infrastructure.
Key Elements of the 2024-25 Budget Vision:
- Growth:
- India aims to achieve developed economy status by 2047, necessitating sustained high growth rates.
- In 2023, India’s per capita income grew by 9.2% in nominal terms, showcasing robust economic potential.
- Sustaining such growth could elevate India’s per capita income from $2,500 to $14,000 by 2047.
- Employment:
- With a focus on labour-intensive manufacturing, India aims to capitalise on its demographic dividend.
- The manufacturing sector, vital for job creation, will be pivotal. Currently, India’s labour to capital ratio is rising rapidly, prompting factor market reforms and digitization of land records.
- Manufacturing:
- Emphasising competitiveness in manufacturing complements growth in the service sector.
- This strategy aims to position India as a global manufacturing hub, leveraging initiatives like ‘China +1’ and attracting investment to boost industrial output.
- Public Finance:
- Addressing fiscal challenges through frameworks like the Fiscal Responsibility and Budget Management (FRBM) Act ensures fiscal discipline.
- Despite high debt-to-GDP ratios compared to peers, initiatives focus on reducing debt burdens and maintaining sustainable fiscal policies.
- Others:
- Reforms in agriculture markets, education, health, and environmental sustainability are pivotal for holistic economic development.
- These reforms aim to enhance productivity, improve human capital, and meet global environmental standards, fostering sustainable growth.
Significance of Budget in India:
- Policy Document:
- The budget serves as a comprehensive policy document that outlines the government’s financial plans and priorities for the fiscal year.
- It includes detailed allocations across sectors like health, education, infrastructure, and defence, reflecting strategic economic and social policies.
- Economic Planning:
- It plays a crucial role in economic planning by projecting revenue and expenditure targets, guiding macroeconomic policies.
- The budget estimates for 2023-24 projected a total expenditure of ₹39.45 lakh crore and estimated revenue receipts of ₹22.45 lakh crore, indicating planned financial outlay and resource mobilisation efforts.
- Allocation of Resources:
- Determines allocation of public funds to sectors crucial for development and welfare.
- For instance, in the 2023-24 budget, ₹2.23 lakh crore was allocated to health, ₹1.08 lakh crore to education, and ₹1.35 lakh crore to rural development, showcasing sector-wise resource allocation priorities.
- Fiscal Discipline:
- Ensures prudent management of finances, maintaining fiscal stability.
- The fiscal deficit target for 2023-24 was set at 6.4% of GDP, reflecting efforts to balance expenditure needs with revenue constraints.
- Market Sentiment:
- Budget announcements impact market sentiments, investor confidence, and business decisions.
- After the budget presentation in February 2023, stock markets reacted positively with the Sensex rising by 1,147 points, highlighting the market’s response to policy signals.
- Transparency and Accountability:
- Enhances transparency in governance through detailed financial reporting and parliamentary scrutiny.
- The budget speech provides a breakdown of revenues and expenditures, fostering accountability in financial management.
- Public Expectations:
- Addresses public expectations regarding taxation, subsidies, welfare schemes, and economic reforms.
- For example, changes in tax slabs or allocation of funds to social welfare programs directly impact citizens’ financial planning and expectations
Strengths of India:
- Demographic Dividend:
- India’s population includes over 600 million aged 18-35, with 65% under 35.
- Expected demographic dividend till 2055-56, peaking around 2041.
- Vibrant Democracy:
- India is the world’s largest democracy with about 1.44 billion people and 945 million voters.
- Demonstrates resilience through composite culture and democratic institutions.
- Resilient Economy:
- India’s economy has shown resilience since liberalisation 30 years ago.
- Forecasted to reach $30 trillion by 2047, with a per capita GDP of $17,590.
- Recorded one of the fastest-growing major economies in FY22/23 at 7.2%.
- Diplomacy:
- India employs public diplomacy effectively as a responsible global power.
- Ranked 28th in the Global Soft Power Index 2023.
- Improved trust ratings among ASEAN countries, highlighted by hosting G20 and SCO in 2023.
- Sustainable and Inclusive Development:
- Leading contributor in global climate change efforts, committed to ‘net zero’ emissions by 2070.
- Initiatives like ‘Mission LiFE’ promote environmentally conscious lifestyles.
- Promotes gender equality with initiatives like ‘Beti Bachao Beti Padhao’.
- Technology and Innovation:
- Advancing healthcare and agriculture through AI and digital infrastructure.
- Over 7,000 farmers are using AI for crop health monitoring and yield optimization.
- Unified Payments Interface (UPI) and robust digital public infrastructure driving economic transformation.
Challenges Faced by India:
- Lack of Inclusivity:
- Income distribution disparity with the top 10% of the population receiving 57% of national income.
- Legacy issues such as a high proportion of non-agricultural labour in the unorganised sector and women’s time devoted to the care economy.
- Global Uncertainty:
- Geopolitical conflicts and structural changes like energy transitions impacting labour market flexibility and mobility.
- Implications for transport infrastructure and housing markets.
- Lack of Trade Openness:
- Rising protectionism in rich countries under environmental concerns.
- Challenges due to weak global demand and monetary policy tightening affecting real GDP growth.
- Economic Growth Challenges:
- Need for sustained high growth rates to transition from lower middle-income to middle-income and eventually high-income status.
- Targets include achieving an $7 trillion economy for middle-income and a $60 trillion economy for high-income status.
- Other Challenges:
- Risks include deteriorating asset quality of banks, delays in fiscal consolidation, difficulties in trade agreements, and impact of below-normal monsoon seasons.
Conclusion:
The 2024-25 budget presents an opportunity to articulate India’s economic trajectory, aiming for sustainable growth, job creation, and fiscal prudence. It is a critical tool to align economic policies with developmental aspirations, ensuring India’s position as a global economic player through strategic investments and reforms.
Source: IE
FAQs
Q: What is India’s big reform push?
A: India’s big reform push is a series of major changes the government is making to improve the economy, create jobs, and enhance infrastructure. These reforms aim to simplify regulations, encourage investment, and boost various sectors like agriculture, manufacturing, and digital services.
Q: Why is India implementing these reforms?
A: The government is implementing these reforms to stimulate economic growth, make it easier for businesses to operate, attract more investments, and ultimately improve the standard of living for its citizens. The goal is to make India a stronger player in the global economy.
Q: What are some key areas being reformed?
A: Some key areas being reformed include agriculture, where new policies aim to increase farmers’ income; manufacturing, to boost production and create jobs; taxation, to make it simpler and more efficient; and digital services, to promote innovation and connectivity.
Q: How will these reforms benefit everyday people?
A: These reforms can lead to more job opportunities, better infrastructure like roads and internet, easier access to markets for farmers, and a simpler tax system. Overall, they aim to create a more prosperous and inclusive economy that benefits everyone.
Q: What challenges might India face with these reforms?
A: Implementing such major reforms can face challenges like resistance from those used to old systems, the need for efficient execution, and ensuring that the benefits reach all parts of society. However, with strong commitment and good planning, these challenges can be overcome.
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