Brain Booster for UPSC & State PCS Examination (Topic: India’s Path to Economic Recovery)

Brain Booster for UPSC & State PCS Examination


Current Affairs Brain Booster for UPSC & State PCS Examination


Topic: India’s Path to Economic Recovery

India’s Path to Economic Recovery

Why in News?

  • India’s economy is firmly on the path of a V-shaped recovery after the collapse in the first quarter, and further improvement is expected in the third quarter, ‘notwithstanding some moderation’ in November’s indicators, the Ministry of Finance said, attributing the recovery to the unlocking process along with ‘astute’ stimulus measures.

Going Towards Normalcy

  • Business activity in India’s manufacturing sector surged to its highest level in 13 years. The seasonally adjusted headline of Nikkei Manufacturing Purchasing Managers’ Index (PMI) , compiled by IHS Markit, rose from 56.8 in September to 58.9 in October.
  • The Nomura India Business Resumption Index (NIBRI) increased to 84.4 for the week ending November 1, the highest value since the imposition of the lockdown; 100 indicates pre-pandemic levels of economic activity.
  • The Asian Development Bank (ADB) has upgraded its forecast in early week of December 2020, for the Indian economy, projecting 8 per cent contraction in 2020-21 as compared to 9 per cent degrowth estimated earlier, on the back of faster than expected recovery.
  • The six-member MPC voted unanimously to leave the policy repo rate — the rate at which the RBI lends funds to banks — unchanged at 4 per cent for the third time in a row in the bi-monthly monetary policy announced (December 4).
  • This effectively means lending rates in the banking system and EMIs on home, auto and personal loans will remain more or less steady.
  • It also decided to continue with the accommodative stance of monetary policy as long as necessary — at least through the current financial year and into the next year — to revive growth on a durable basis and mitigate the impact of Covid-19, while ensuring that inflation remains within the target going forward.

Discussion Points

  • The conference underlined the need to extend capabilities on how to investigate virtual assets, and the necessity of applying rules to regulate virtual asset service providers to prevent money laundering.
  • The conference agenda included trends and investigations on cryptocurrency crime, exploring criminal flows and operations in dark markets, ransomware and sextortion case studies, money laundering involving virtual assets, and the transfer of drug proceeds using cryptocurrencies.
  • Participants at the conference endorsed recommendations on capacity building initiatives to extend capabilities on how to investigate virtual assets, establishing clear regulatory framework to prevent money laundering, adopting ‘follow the money’ strategies against criminal proceeds, strengthening information exchange to dismantle criminal networks, and exploiting new technologies in criminal finances investigations.

Goldilocks Economy

  • According to research published by Morgan Stanley, the Asian economies of India, China, Singapore and Indonesia are expected to rebound from the devastating effects of the COVID-19 pandemic, entering a 'Goldilocks' phase in 2021.
  • A Goldilocks economy is a phrase that has been used to indicate a state which is : “neither strong nor weak.”
  • Some of the commonly accepted features of such economies are: low unemployment rate and low inflation.
  • As far as GDP goes, a Goldilocks phase is typically witnessed when an economy is recovering from a slump. As a key metric indicating the health of an economy, the GDP is a broad measure outlining the total value of all finished goods and services produced in a country. Steady GDP growth of between two and three per cent is usually associated with a Goldilocks phase.

Observations by Ministry of Finance

  • “there is a growing cautious optimism that the steep plunges of April-June quarter may not resurface with significant progress in vaccines and contact intensive sectors increasingly adapting to a virtual normal,” the
    ministry said in a monthly economic report.
  • Agriculture, which has grown consistently at 3.4% through the first half of 2020-21, is expected to remain the economy’s bright spot with rabi crop sowing showing a healthy rise by the end of November. By November
    27, overall rabi crop acreage was 4.02% higher, with the area under pulses increasing 43.3%, the ministry pointed out.
  • Distress in the rural labour force seems to have worsened. “The demand for jobs under the Mahatma Gandhi National Rural Employment Guarantee scheme (MGNREGS) has surged, with a y-o-y growth of 47.2% in November. Till November, 266.67 crore person days have been created under the scheme — a jump of 51.3% as compared to previous year.
  • V-shaped recovery, evident at the half-way stage of 2020-21, reflects the resilience and robustness of the Indian economy. The fundamentals of the economy remain strong as gradual scaling back of lockdowns, along with the astute support of Atmanirbhar Bharat Mission has placed the economy firmly on the path of recovery.