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The Hindu Editorial

18-November-2023

1. State of the economy — temper the euphoria.

Topic: GS3 – Indian economy

IMF Growth Projection and Post-COVID Recovery:

  • The Indian economy has recovered from the COVID-19 pandemic,with GDP growth projected to be 6.3% in 2023-24.
  • However,there are concerns about the sustainability of this recovery, as it has been driven by a few sectors and has not been broad-based.
  • India’s trade deficit with China is a growing concern,and the country is also vulnerable to oil and food shocks.
  • There has been a decline in industrial output growth rates,especially in capital goods, and a decade-long decline in the economy’s fixed investment rate.
  • India’s HDI ranking has slipped by one in recent years.

Concerns about the Sustainability of India’s Economic Recovery

  • The recovery has been driven by a few sectors,such as services and IT, and has not been broad-based.
  • There is a growing trade deficit with China,which could threaten the sustainability of India’s economic growth.
  • India is also vulnerable to oil and food shocks,which could derail the economy.

Declining Industrial Output Growth Rates

  • Industrial output growth rates have been declining in recent years,especially in capital goods.
  • This is a worrying trend,as it suggests that India’s manufacturing sector is struggling.
  • The decline in capital goods output is particularly concerning,as it suggests that investment in new machinery and equipment is falling.

Declining Fixed Investment Rate

  • The fixed investment rate has been declining for a decade.
  • This is a worrying trend,as it suggests that businesses are not investing in new capacity.
  • The decline in the fixed investment rate is likely to have a negative impact on India’s long-term economic growth.

Declining HDI Ranking

  • India’s HDI ranking has slipped by one in recent years.
  • This suggests that India’s social development is not keeping pace with its economic growth.
  • The decline in the HDI ranking is a matter of concern,as it suggests that India is not making progress in improving the lives of its citizens.

Conclusion

  • The Indian economy is facing a number of challenges,including a growing trade deficit with China, declining industrial output growth rates, and a declining fixed investment rate.
  • The government needs to address these challenges in order to ensure that India’s economic recovery is sustainable and that the country can achieve its long-term economic goals.

Question: Despite India’s projected economic growth of 6.3% in 2023-24, there are concerns about the sustainability of this recovery. Critically examine these concerns and suggest measures that the government can take to address them.

2. Moves by the U.S., China to stabilise their rocky relations hold lessons for India.

Topic: GS2 – International relations.

Context:

  • The recent summit meeting between U.S.President Joe Biden and Chinese President Xi Jinping offered the promise of much-needed respite for the world by stabilizing a relationship that has recently been in free fall.

The summit yielded two significant takeaways:

  • Several concrete agreements,including to restart military-to-military direct dialogue and to discuss risk and safety issues involved with artificial intelligence.
  • Establishing a floor to the relationship,which was the goal when the two leaders last met in Bali in 2022.

Concerns about the Sustainability of the Stabilization

There are two potentially disruptive political events looming on the horizon:

  • Taiwan’s elections in January 2024,which could see a further ratcheting up of tensions across the strait.
  • The U.S.elections in November 2024, which will inevitably bring heated rhetoric on China.

A Longer-Term Concern

  • The U.S.and China have a basic point of difference in how they see the future of their relations:
  • Xi sees the relationship as one of partnership, while Mr. Biden sees it as one of competition.
  • Despite this difference,both sides agree that high-level engagement and open channels are key in preventing competition from sliding into conflict.

Lessons for India-China Relations

  • The crisis along the Line of Actual Control enters its fourth winter,and India can learn from the U.S.-China summit:
  • Dialogue in and of itself is not a concession.
  • Building a floor,when ties between major powers are at the risk of free fall, is the first step.

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