The Hindu Editorial

24-November-2023

1. A $5 trillion economy, but for whom?

Topic: GS2 – Indian economy.

Extension of Pradhan Mantri Garib Kalyan Ann Yojna:

• Prime Minister Narendra Modi recently announced the extension of the Pradhan Mantri Garib Kalyan Ann Yojna, a scheme providing 5 kg of free foodgrains every month to beneficiaries of the National Food Security Act.
• The extension is for five years, aiming to prevent any citizen from sleeping hungry, thereby benefiting 80 crore Indians until 2028.

Comparison with Japan’s Economic Growth:

• The article draws a parallel with Japan’s current status as the third-largest economy globally and delves into the social issues prevalent in the country.
• It highlights concerns such as suicides, social withdrawal (known as hikikomori), and ‘lonely deaths’ (kodokushi), suggesting that Japan’s economic growth has not equally uplifted all segments of its population.

Japan’s Economic Diplomacy and Social Consequences:

• Japan’s response to losing its economic rank to China is characterized by ego-free economic diplomacy, embracing China as a significant trading partner.
• The article points out that the sidelining of personal and professional relationships amid high-value industrial growth in Japan has led to social issues affecting a considerable part of its population.

Concerns for India’s $5 Trillion Goal:

• Questions are raised about whether India’s ambitious pursuit of a $5 trillion economy by 2028 will adequately address social issues, especially for the 80 crore citizens currently benefiting from free rations.
• The article emphasizes the importance of considering the social impact as the country races towards achieving economic milestones.

Capital, Labour, and Productivity Challenges:

• The distribution of capital ownership in India is highlighted, revealing that 1% of the population owned 41% of the nation’s wealth in 2021, while 50% owned a mere 3%.
• The article outlines challenges in labour contributions due to educational and skill gaps and limited digital literacy. It notes early signs of productivity growth through the development of digital and physical infrastructure.

Government’s Target and Sectors:

• The government’s strategy to achieve the $5 trillion goal involves focusing on sectors such as the digital economy, fintech, energy transition, and climate change.
• The Minister of State for Finance identified tools and initiatives, including GST, the Insolvency and Bankruptcy Code, corporate tax reduction, Make in India, Start-Up India, and Production Linked Incentives.

Inequality Index and Per Capita Income Concerns:

• The article expresses concerns about India’s per capita income, ranking 149 among 194 countries in 2022, with no official estimates for the projected per capita income at $5 trillion.
• It raises questions about the inequality index, comparing India with China and Japan, where the latter two countries seem to share their economic fortunes more evenly.

Conclusion:

• The article concludes by questioning whether the pursuit of a $5 trillion economy will deepen the divide between different segments of the Indian population, particularly as the country navigates the complexities of economic growth and social inequality.

Question: Discuss the social implications and challenges associated with India’s target of achieving a $5 trillion economy by 2028.

2. October’s foreign trade tidings present a picture that could well be misread

Topic: GS3 –  Indian Economy

Export Uptick:

• In October 2023, India experienced only the second uptick in goods exports for the current financial year, recording a growth of 6.2%.
• Merchandise imports saw a sharper increase of 12.3% over the previous October and nearly 21% over September, reaching an all-time high of $65.03 billion.

Trade Deficit and Economic Impact:

• The resulting trade deficit reached a record $31.5 billion, creating concerns among economists and analysts.
• Import surge attributed to anticipation of festive demand for items like jewellery and high-end electronics, but the scale exceeded expectations.

Finance Ministry’s Assessment:

• The Finance Ministry’s monthly economic review acknowledged the unexpected growth in merchandise exports, the highest in 11 months.
• The report highlighted that both exports and imports grew despite initial fears of weak global demand.

Factors Mitigating Concerns:

• The recent decline in oil prices expected to alleviate the import bill, which hit a seven-month high of $17.7 billion.
• Festive and wedding demand contributed to spikes in gold and silver imports, influenced by price drops in precious metals in early October.
• Some increase in electronics imports attributed to stockpiling before the implementation of new import norms.

Government Measures:

• The government’s efforts to curb the import bill involve measures like quality control orders and changes in import norms.
• Focus on boosting exports considered critical for supporting job creation and overall economic growth.

Concerns about Export Trends:

• Despite the headline uptick in October’s exports, the shipments’ value of $33.6 billion is the lowest in 12 months, reflecting a 6% decrease from the 2021 tally.
• While global trade grew by 2% month-on-month in October, Indian exports dropped by 2.6%, signaling a missed opportunity in a slowing world trade scenario.

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