Before the corona virus for India’s economy, it was believed that it could overtake China’s economy. However, now the problem for India’s economy is increasing continuously. Recently, the International Monetary Fund has released the Potential Economic Estimates of India. Which indicates the hidden problems in India’s economy.
Today we will try to understand where is the problem in India’s economy. What is the solution to these problems? On the other hand, how are these problems facing India’s economy facing challenges at the international level?
crude oil
Rising crude oil prices are one of the biggest problems of the Indian economy. There is no solution to this problem in the near future. According to data recently released by Goldman Sachs, crude oil prices may go around $120 per barrel in the third quarter of this year. For information, let us tell you that at present, the international crude oil prices are running around $90 per barrel. Which is the highest level of last 5 years.
India imports about 86% of its crude oil needs from abroad. OPEC countries are also included. The Organization of OPEC Plus Countries is currently the largest group controlling crude oil exports around the world.
India’s economy along with the rest of the world is also trying to shift to renewable energy. As a result of these efforts, the international crude oil prices are continuously increasing. At the same time, the problem of India’s economy is also increasing.
At present, the world is investing the most on renewable energy. Even if it is an OPEC plus country, why not? As a result, the gap between demand and supply has widened. Due to which the price of crude oil is increasing internationally.
Its production is running at its lowest level in crude oil producing countries around the world. Whereas worldwide the demand for crude oil has reached the level before the corona virus. Its demand may increase even more in the coming time.
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Due to the winter falling in Europe, the demand for crude oil has also increased. Crude oil prices have also been affected by the cost of coal. This is directly affecting the economy of India.
Financial improvement
The Narendra Modi government is constantly trying to implement economic reforms. But due to political reasons this is not happening. Due to which the economy of India is suffering.
The problem of India’s economy is also related to these economic reforms. Modi government wants to do privatization at a fast pace. But the valuation of government companies is also creating hurdles in this. The Government of India has announced that it will soon come out with the IPO of the country’s largest life insurance company LIC. Earlier, the Modi government had also privatized Air India. But privatization of other companies in this manner seems difficult. Due to which the problem of Indian economy is going to increase.
Poorly implemented economic reforms are also adding to the problems of India’s economy. Recently, the Modi government had passed 3 new agriculture laws. Which was heavily opposed. The Modi government was accused of passing new agricultural laws without talking to the farmers. After which they had to be taken back.
In the same way, we can take demonetisation as well. Demonetisation and GST were also implemented without any thought. Due to which the economic problems of India increased.
inflation rate
The problem of India’s economy is also increasing due to the rising inflation rate. According to the inflation data released last month, it has reached its highest level. The urban inflation rate in India is around 7%. Apart from this, the rural inflation rate has also increased very much in India. Due to which economic activities in India have been affected.
Inflation in India is also increasing due to the rising prices of petrol and diesel. Even now the price of petrol and diesel is more than ₹ 100 per liter in many cities of India. Recently, the Modi government had definitely reduced the prices of petrol and diesel. Petrol and diesel prices in India were slashed by around ₹20 per liter in some cities. But still their prices are much higher than their normal level.
Demand in India is decreasing due to rising inflation. Its direct loss is happening to the economy of India. Economic experts are constantly demanding that India’s petrol and diesel prices should be reduced. Whereas the Indian government argues that we are using this money as subsidy to promote electric vehicles. While economic experts do not agree with this.
rising economic deficit
India’s fiscal deficit is increasing continuously. It has reached its highest level. According to the recently released data, India’s fiscal deficit has reached 38%. Which is the highest ever.
India’s trade with China is increasing continuously. But the trade balance continues to deteriorate. India is importing more goods than China. While it is not getting success in exporting the goods. According to the recently released figures, only countries like America and England are there. With whom his business is running in profit. This trade imbalance remains with all other countries. Due to which the problem of Indian economy is increasing. If it is not rectified soon, India’s economy may be in even more trouble in the coming times.
The economic package of the economy given by the government has also increased India’s economic deficit. Recently, the government has given economic packages of more than 1000000 crores to support the Indian economy. But these economic packages do not seem to be of any benefit.
If seen in the long run, this economic package is going to be a burden on the economy of India. Which doesn’t seem to have any solution. The bond market is also going sluggish at the moment. The precious time of the market has reached its all-time high. Due to which the government is facing a lot of difficulties in getting cheap loans. Bonds in the US are currently hovering around 2%.
