DMPQ: Even though Indian economy is growing at a rate of 7% GDP, but still it has some  Inherent vulnerabilities? Discuss

Investment – For sustaining high growth, the economy need to continuously add to its “production capacity” through new investment flows. • Productive investment is money that is spent for – building roads, ports (and other public infrastructure), factories, and workforce quality enhancement. • Currently, India is seeing a sharp decline in the rate of investments in recent years which has come down from 34% of GDP in 2014 to 30% currently. • More strikingly, the current investment rate is the lowest in about 15 years, which makes it incompatible with the aspired high growth rate of 7 – 8%.

 

Industrial production is on decline due to the demonetisation effect. Now it is hovering at an abysmal rate of 2%

 

Growth Of NPA’s:  Bank’s health plays a significant role in an economy. But rising problem of Balance sheet syndrome couple with NPA’s is huge concern. As a result of rise in NPA’s rate of lending has come down.  The pace of lending has come down from 2014. It is now growing at a rate of 6% only.

Growing rate of combined fiscal deficit of state and centre is a worrisome situation. India’s sovereign debt is near about 70%. Combined FD = 6.5%

 

Rise of crude oil prices: There is sustained increase in the prices of the crude oil which has bearing on our import bill.  80% of our oil demand is met by imports. The extraneous factors play a huge role i.e. factors beyond our hands.

 

Consistent Farmer distress.

 

 

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