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  SWOT Analysis of Indian Economy Indian economy has come a long way from the command, control style of functioning rooted in an inward looking, import substitution policy to an export orientation, globally competitive, quality driven style of functioning. In short term, with improved investment, scenario coupled with government reforms, the industrial  performance is expected to do better. But in large run, the performance depends on the investment and growth in infrastructure, the continued availability of natural resources, skilled workforce, global market scenario and how well the reforms are initiated. This will gain momentum as the wheels of growth have been set to motion: 1)   Strengths i)   The external debt condition is within safe limits and there is no possibility of slippage from the fiscal discipline and consolidation path is also followed for the last few years, both at the central and state governments with and without Ujjwal DISCOM Assurance Yojana (UDAY). ii)   The demonetisation drive of high-value currencies in November 2016 is likely to yield long-term  benefits of reducing corruption, increasing household financial savings and widening the tax cover. iii)   India's share in the world manufacturing exports is rising because the country has remained competitive despite high capital inflows and inflation. iv)   The Goods and Service Tax bill (GST) has been passed by the Parliament and its implementation will result in a single nationwide market; better tax compliance; higher investment and growth; and good governance practices. v)   In terms of commitment to climate change, India has performed better than other countries in imposing a tax on petroleum and diesel. vi)   Considering all the strengths, the Indian economy has the potential to grow at 8 to 10 percent of GDP in real terms over the medium to long run. This makes the real returns on investments in India most attractive among all comparable and competing countries at present. 2)   Weaknesses i)   Even the Goods and Service Tax (GST) implementation, to begin with, is likely to suffer from sub-optimal design and too complicated a structure for efficiency gains. ii)   India has very and inefficient delivery of necessary public services like delivery of health and education does not endow with any good replicable model across states. iii)   Over the years the private investment is low and exports are not in good shape growing at a very low rate, which are significant sources of growth but has slackened considerably of late in India. iv)   Investment and savings rates have been declining in the country over recent years while Income and consumption inequalities across states are increasing in India. v)   The ratio of the working-age population of non-working age population in India will reach its maximum value of around 1.7 by 2020. This is substantially less than corresponding maximum values in other BRICS countries, implying a lower demographic dividend in India. 3)   Opportunities i)   The focus of the government should be on competitive and cooperative federalism which presents a great potential to attract skills, investment and technology. ii)   The higher growth prospects in developed countries like the US and Germany can generate a new avenue for exports from developing countries including India. iii)   The Government should focus on those agendas of structural reforms which are yet to be finished after the demonetisation drive of high-value currencies. iv)   In the milieu of promoting labour-intensive exports, after the issue of Brexit, India has the better  prospect of renegotiating free trade agreements with the UK and Europe and gain substantially for export and employment growth. v)   There is an opportunity to create a Public Sector Asset Rehabilitation Agency to address the twin  balance sheet problem by taking up large and difficult cases and taking tough decisions. 4)   Threats i)   When it comes to the rating agencies, India, unfortunately, has a threat because with almost unrevised ratings over the last seven years, but its performance has significantly improved over the last few years. ii)   The competitive populism in the federal democracy can damage fiscal discipline and governance standards. iii)   As a consequence of developments in the US economy, global interest rates and inflation rates in advanced countries are on the way to strengthen. This can have an adverse impact on India's capital inflow and outflow and hence on its investment climate.  iv)   The demographic dividend India is likely to retreat soon because the peak is likely to be attained by 2020 and the peak is relatively lower than the one reached in China and Brazil. v)   The international political order and environment are fast changing towards isolation and protectionism. The mood of anti-globalisation regarding the goods, services and labour prevails in advanced economies. This could effectively close a potent option of achieving 15-20 per cent export growth in India to realise its overall growth potential of 8-10 percent GDP growth over time.


Mar 14, 2019
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