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The recent revision of India's projected GDP growth rate by the International Monetary Fund (IMF)...

The recent revision of India's projected GDP growth rate by the International Monetary Fund (IMF) and its implications for the country's economic recovery. It also highlights concerns regarding employment, inflation, and India's growing trade deficit with China.

  • The International Monetary Fund (IMF) has revised India's projected GDP growth rate for 2023-24 to 6.3%, up from the earlier estimate of 6.1%.

  • This revision is seen as a vindication of India's short-term economic management by policymakers.

  • The IMF has revised downwards the world GDP growth projection, including China's, to 4.2%.

  • India's GDP contracted by 25.6% during the second quarter of 2020, the worst among the world's major economies.

  • The output contraction in 2020-21 was one of the worst among the world's large economies, at 8.5% over the previous year.

  • India's real annual GDP growth rate slowed down from 6.8% in 2016-17 to 2.8% in 2019-20 before the pandemic.

Recovery gained momentum in 2022-23 as domestic supplies were restored and global supply chains were straightened out.

  • Output recovery is welcome, but concerns remain about its effects on employment, inflation of essential food items, and its impact on the poor.

  • Policymakers need to consider the fast-changing geopolitical underpinnings of economic policy making.

  • The end of globalisation as we knew it has revealed India's vulnerabilities to oil and food shocks.

  • India's growing deficit with China is a major concern, as its economic frailty has increased and its dependence on Chinese imports of manufactures seems structural.

  • The Atmanirbhar Bharat Abhiyan was initiated by the government in May 2020 to reduce Chinese imports of critical industrial products.

  • China accounts for 15%-16% of India's imports and a third of India's trade deficit.

  • Despite the efforts to curb Chinese imports, the trade deficit continues to rise.

  • The decline in industrial growth rate is a result of the increasing reliance on Chinese inputs and the undoing of import restrictions.

  • The Index of Industrial Production (IIP) shows a steady decline in industrial growth rates over a longer period.

  • From 2011-12 to 2021-22, the gross fixed capital formation to GDP ratio declined from 34.3% to 28.9%.

  • The public sector share of the gross fixed capital formation has remained constant at 8%.

  • Net foreign direct investment to GDP ratio fell from 3.6% in 2008 to 2.4% in 2022.

  • The official picture of public investment growth since FY22 seems suspicious.

  • Public investment has three parts: central government, States, and central public sector undertakings (PSUs).

  • The rise in the Centre's investment is due to merging extra-budgetary borrowing by central PSUs with the Centre's own Budget.

  • The projected boost in public investment seems illusory.

  • Public investment seems to be around 6% of GDP, similar to pre-COVID-19 levels.

  • The credibility of the Human Development Index (HDI) is discussed.

  • The value of India's HDI index decreased from 0.645 in 2018 to 0.633 in 2021.

  • India's global rank in HDI also went down during 2015-21, indicating that other countries have performed better.

  • The trade deficit with China is a strategic threat to India's economy, despite government efforts to address it.

  • There has been a decline in industrial output growth rates, particularly in the capital goods sector.

  • The economy's fixed investment rate has been declining for a decade.

  • The public sector's share in fixed investment is expected to remain unchanged until 2021-22.

  • India's HDI ranking has slipped by one.

  • Official commentators should focus on understanding and addressing the economic setbacks instead of emphasizing short-term growth projections.

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