Indian Economy

INDIAN ECONOMY Indian economic development largely depends on rural economy. Infrastructure development is an aspect of the Indian economy that is crying for immediate attention. Indian economic programmes call for balance between socialism and capitalism as defined in Mixed Economy by the first Prime Minister of India, Shree Jawaharlal Nehru. Mixed Economy is a contribution of India to the world as was Neutrality or Non-Aligned Movement in world politics. Schemes like free mid-day meals to students in Government Schools that was first introduced in India for the benefit of the children of the lower income groups of the society by popular film-star turned politician and former Chief Minister of the southern state of Tamil Nadu, Shree M.G. Ramachandran, are gaining popularity throughout India and are being adopted by increasing number of states through the length and breadth of India with the active financial support and encouragement of the Central Government. The scheme is gradually expanded with the passage of time to higher age groups of the students to cover more students under the scheme. India of late is also resorting to reduction in custom and excise duties to encourage trade and industry while increase in taxes on undesirable items like tobacco products and alcohol is the ruling trend. Rationalisation of taxes including income tax and customs and excise duties covering reduction in their rates is injecting new life to the Indian economy. The Indian government budgeted to spend about ten trillion rupees in 2009-2010, about three trillion more than the previous year

amounting to an annual rise of about 43% in expenditure in contrast to the rise in revenue only at about 2%, thus giving way for deficit financing that inevitably leads to fiscal deficit. Allotment of liberal funds to the National Rural Employment Guarantee (NREG) scheme in the budget is a laudable effort to improve the lot of the rural poor of India. Even though children make up to 40% of the population of India, they are given 11% allotment in the budget of 2009-2010. They should have been given better attention. Privatization of the public sector industries is the theme of the Indian Government from some years after it ventured into liberalization in economy. This resulted in a large number of its stakes in different public sector companies being sold out. This massive privatization was though questioned in the court of law, the Supreme Court did not stop it as it decided that it does not have jurisdiction in this sphere. While the oil requirement of the United States of America will increase by 46% in the next ten years and of China by about 96%, India’s requirements will go up by about 132%. This is certainly a mammoth increase. India must find additional sources for oil within and outside the country apart from discovering other sources of energy as alternative to the oil. India will find itself in great problems in coming days unless it does not act fast. Further, increase in oil prices world over may find India in deep quicksand. India has only two options: either it will go down by inaction or it will claw its way up by a concerted action plan. Value Added Tax is a new phenomenon introduced in India’s economic scene and commercial field a few years back to replace the sale tax. Though most States and Union Territories accepted the regimen, a few are yet to come round to the novel taxing system.

Employment in India is certainly in a very dismal situation. This is because nearly a quarter of a million jobs have been lost in India over the last few months due to the economic crisis that has struck the world. This is not at all a healthy development for India and this is some thing that the Government of India has been trying to overcome.

CONSOLIDATION OF BANKS

Bank consolidation is something that has become common now in the vocabulary of many financial experts. Experts in India believe that consolidation is the ‘in’ thing right now in the wake of the severe economic crisis that has hit the world rather hard right now. People believe that if banks merge and form bigger banks, then the whole system will be able to face the economic uncertainties better. In India, the UPA government was all for it in its previous term. It was loudly thinking about this from the beginning. However, all in all, it did not do much about the whole affair then as its hands were tied by its close links with and support of the Left wing parties. However, it looks as if it will do something about this time, as it is free of constraints of the first innings in the second term. Since the monkey is truly off the UPA’s back this time and it is thus capable of following its own policies, things may turn really well this time around. Its previous term saw only one event with respect to banks namely the takeover of the Bank of Saurashtra by the State Bank of India.

This was seen as the first step at the time in the catalogue of the UPA to do something big in the banking sector. However, the Government did not follow this up with other acts and thus no great changes were affected in the Indian economic sector last time. Protests by the staff of the subsidiary banks against merger with the SBI were also responsible for this inaction at the time. However, it looks as if some changes may take place this time around and the UPA Government will bring some concrete changes this time in the economic front of India. DISINVESTMENT

Disinvestments is something that Indians have been looking up to with interest right. It looks to be the right thing to do right now with the economic recession that is on the rampage right now in the world. This is something that almost all investors have looked at and are trying to benefit out of it. However, many economic experts believe that economic recession is not the right time for disinvestment. Disinvestment, say experts, is something that must absolutely not be carried out at this time. While investors are busy selling their shares, disinvestment will burden the economy and the market and that

may

lead

to

slump

in

demand

and

bearish

tendencies.

Disinvestment on a large scale will result in the whole system falling down rather heavily. To

avoid

such

consequences,

investors

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to

practice

monetary discipline involving restraint, foresight and assessment of the market before borrowing for investment. They must accumulate debts with foresight. But, this is not the case with most of the investors and borrowers. Their greed lead to their own interests at the cost of

others and this attitude leads to the fall of the whole economic system for nobody’s gain. An alternative option is issuance of bonds by the companies rather than resorting to the disinvestment.

But, this is too costly a

method to be viable. There have been other proposals that the government will have to lessen its holdings in various companies from 51% to 33.3%. However, it is doubtful whether the government would even consider this, as it would weaken its stake in the respective companies. AIR INDIA’S CURRENT PROBLEMS

Air India has got itself into quite a big mess by the economic recession. With the economic crisis that has shaken the world from head to toe over the last few years, it has been quite a roller coaster ride for Air India. Air India faces what has been called as the biggest crisis in its history. Whether it will survive the crisis is a big question mark. In order to some how improve the situation, Air India merged with the Indian Airlines, the domestic carrier, to decrease the overhead expenditures. But, to no avail. There is concern that many employees of Air India may be thrown over board and that the salaries of others may also be reduced. This is causing concern among the employees, as it is not easy to find and ferret out jobs in the wake of the economic crisis. However, the Government feels that this economic crisis can be ridden through to its end and advice employees not to panic and agitate as strikes and demonstration only keep passengers further away from the airlines and further deteriorate the situation. The government of India is trying

to keep the situation stable so that Air India will be able to fly high in the sky in the end. MONSOON

Rain is needed in India. India is a country of farmers. These farmers need water for their crops. The main source of water for the farmers in India is rain. The rain comes mainly in the Monsoon season and the farmers’ crop patterns are designed according to the monsoon patterns of a region. The life of farmers depends on the yearly incidence of the monsoon rains. Monsoon is the deciding season of the farmers as their livelihood till the next monsoon depends on it. Farmers looking up at the skies to gauge when the rain would pour are a symbol of India’s economic uncertainties as well as the pathetic dependence of India’s farmers on the uncertainties of the monsoon. Indian Meteorological Department has a history of predicting normal monsoon with adequate rain year after year. But, as a rule it proves right only as exceptions. This throws a huge question mark on the credibility of the Meteorological Department. Monsoon plays a very important role in the Indian agriculture. As the monsoon plays a very important role in Indian agriculture, it looks as if the monsoon plays a very important role in the Indian economy. India, an up-and-coming country depending upon a variable event like inconsistent monsoon is not a healthy development. Indian economy suffering by the irregularity of the monsoon is a common feature of the Indian life. Shortage of food and farm production while monsoon is thin or late and destruction while comes with a vengeance or when it is not needed create havoc to Indian farmers. Sixty percent of the Indian economy is comprised of

agriculture. Now almost Sixty percent of the Indian agriculture depends upon the monsoon. Thus, the Indian government faces a very huge problem every time that the monsoon does not come or is late. Scientists have laid out a four-pronged scheme to attack the problem. The first is that the Indian government must encourage the growth of drought-resistant crops or crops that are genetically modified so as to survive harsher climates. Another thing is to replace the existing crops with these new types of crops. Another very important measure is to conserve the environment and the natural resources, which are of course very important for crops and without which crops will be in a real stew. The last prong in this pitchfork is that the farmers must use new forms of harvesting and also new types of fertilizers or manure. This is of utmost important. Another important thing will be to decrease the pollution levels. FOOD SECURITY

For centuries people in India have suffered from lack of food. Even though the huge famines, which killed a very large number of individuals and caused a large amount of suffering now belongs to the past, there is still hunger in India. This hunger is omnipresent and looks to be irremovable from the country. Even now because of lack of food, children are born malformed or are mentally challenged. This is mainly seen among the poorest of the poor, the people who form the lowest strata of India’s society. These people are mostly seen in tribes. Some of these whole tribes suffer from lack of food. This is not some thing new in India. In India throughout the ages, one can see great famines, which killed a very large amount of people and have thus reduced the population of India quite a lot.

These famines were all very horrendous. However, the Indian government has taken it upon itself that it must somehow end this. It has decided that it will some how make sure that every person in India will be able to avail him or herself to some food. This is a big undertaking and challenge and people have to work hard to make this come true. This will require the whole government’s concerted efforts and involve all the arms of the government it can muster. This will be following the footsteps of the Lula de Silva government of Brazil, which did something very similar and christened it ‘Zero Hunger’. The Indian government hopes to do some thing of this sort, as this ‘Zero Hunger’ scheme was successful in Brazil. The government has already put forward a scheme in which the ‘poor people’, who by its rather astonishing definition encompasses an extremely low percentage of the population, will be sold 25 kilograms of wheat at three rupees each, every month. In the circumstances of many millions of people in India under the poverty line, actually onefifth of them, are already under the scheme of receiving 35 kgs of rice at Rs. 2 each, these people will thereafter receive only 25 kgs at Rs. 2. Therefore, the new scheme appears inadequate and retrograde in some respect.