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The current scenario in India is no better than a sinking ship. The continuous fall in rupee, the slow growth rate of a decade and the inflation are signs to dooming economy.
The challenges in front of the Indian economy are many and needs to be worked upon immediately before it reaches a state of irreversibility.
Factors for sudden slowdown of Indian economy are:-
1) Prospect of the US Federal Reserve tapering its policy of quantitative easing as its economy was recovering; this led to a reversal of capital flows which was pulling down Indian rupee and other currencies.
2) Volatile situation in gulf region.
3) Ballooning of CAD compared to 2010-11 due to imports of GOLD, higher cost of crude imports and recently coal.
4) Weak demand in our major markets has kept exports from growing, collapse in iron ore exports made CAD unsustainably large.
5) Measures to adjust the inflation which has been higher than in advanced economies.
To get through this situation following measures can be suggested:-
1) Reduction in subsidies, insurance and pension sector reforms, implementing GST to restore growth and required states to come to an agreement.
2) Provide strong push to exports by widening the focus market and product scheme.
3) Focus on economic growth to attract investment.
4) Confidence building is prime requirement as present markets are nervous and fragile
3) Bring back the lost competitiveness due to an appreciation of real effective exchange rate of rupee.
4) Increase oil imports from Iran which accepts total payment in rupees and who are large dollar buyers.
5) China is India's biggest trading partner, china alone accounts for half of non-oil trade deficit. This bilateral deficit can be a offset by capital inflows from china to India's infrastructure.
6) Sell gold bond with 5 year maturity which is an exact gold substitute.
7) Urgent need to review manufacturing growth. Create right set of policies to improve technology and increase value addition within country, thus enabling reduction of imports and increase in exports and employment.
We have an economist captaining the ship of democracy in India, he has in the past been at realm of affairs during the 1991 crisis. There is still hope as the fundamentals of our economy are strong but building on them needs more than will it needs deeds and sacrifices.
Every nation is faced with crisis it's unto us to prove we are a mighty adversary.
- Kaveri Talari