What to Read in Indian Express Editorial( Topic and Syllabus wise)

Editorial 1 : Nothing Cyclical About It

Context: India’s growth slowdown is a signal of declining confidence in government

 

Introduction: The downward revision of India’s growth prospects to 6.4% in FY 25, down from 8.2% is the lowest growth forecast since the pandemic.

 

Key Issues in India’s Economic Growth

• Cyclical Narrative
  1. Weak Analytical Framework: The revision of growth projections underscores the lack of robust data-driven tools to predict economic cycles.
  2. Short-lived Growth Spurts: High growth episodes in India are brief, raising concerns about the economy's structural resilience.
  3. Uncertainty in Growth and Inflation Planning: Ambiguity in economic strategies undermines confidence in the government's ability to navigate growth-inflation dynamics.
• Overdependence on Public Spending
  1. Monsoon Economy Mindset: Reliance on favourable weather conditions and public spending to drive growth reflects structural weaknesses.
  2. Stagnant Private Sector: Indicators such as sluggish private consumption, stagnant wages, and slow capital formation reveal a decade-long stagnation in private sector contributions.
  3. Economic Reliance on Infrastructure Spending: Heavy investments in roads and railways lack a clear framework for assessing efficiency or long-term productivity gains.

 

Emerging Investor Concerns

• Inefficiency in Capital Expenditure
  1. Capex Priorities: Focus on large-scale infrastructure projects, while smaller, high-efficiency investments are neglected.
  2. Economic Viability: Infrastructure investments, though visible, may not translate into substantial economic returns or quality-of-life improvements.
• Governance Deficiencies
  1. Scheme Failures: High-profile initiatives such as Swachh Bharat and Namami Gange have fallen short of expectations due to poor execution and systemic challenges.
  2. Regulatory Complexity: Confusion in tax regimes like GST and overregulation stifle investor confidence.
  3. Corruption Resurgence: Retail-level corruption has made a comeback, eroding the government’s reputation for clean governance.
• Concentration of Economic Power
  1. Capital Concentration: Over-reliance on a few corporate players stifles competition and innovation in the private sector.
  2. Fear of Expropriation: The perception of unfair treatment of mid-sized enterprises creates a hostile investment climate.

 

Structural Challenges in India’s Economy

• Private Sector Weakness
  1. Limited Investment Appetite: Despite available capital, companies struggle to identify viable projects.
  2. Middle-Class Squeeze: Stagnant wages, rising debt defaults, and declining household savings indicate financial distress among key economic contributors.
• Employment and Human Capital
  1. Construction Sector’s Limitations: While infrastructure projects provide employment, they do little to enhance long-term human capital development.
  2. Skill Development Deficiency: Transition into higher-value jobs remains elusive, highlighting systemic issues in skill-building initiatives.

 

Way Forward: Policy Implications and Recommendations

• Reassessing Capex Strategy
  1. Conduct comprehensive assessments of infrastructure projects to ensure efficiency and economic returns.
  2. Prioritize investments in sectors that yield higher productivity and human capital development.
• Simplifying Governance and Regulation
  1. Streamline tax and regulatory policies to reduce complexity and foster investor confidence.
  2. Address corruption issues at both centralized and transactional levels to rebuild credibility.
• Broadening Economic Participation
  1. Promote competition by reducing reliance on a few dominant players.
  2. Encourage mid-sized enterprises by ensuring fair treatment and reducing fears of expropriation.
• Strengthening Structural Resilience
  1. Focus on policies that boost private sector capital formation, increase wages, and revive manufacturing.
  2. Enhance governance mechanisms to execute public schemes effectively and ensure sustained benefits.

 

Conclusion

India has a real growth opportunity. But the growth slowdown is a signal of declining confidence in the government and there is noting cyclical about it.

Editorial 2 : Growing Together

Context: Claims about India’s rising inequality don’t tell the full story.

 

Introduction: Inclusive growth is critical for India to become a developed nation by 2047. Leading indicators of inclusive growth include the improvements in the living standards of those at the bottom of the economic pyramid and the direction of changes in income inequality.

 

Key Findings on Income Distribution

• Trends in Income Inequality
  1. Decreasing Inequality: Survey-based PRICE ICE360 data reveals a decline in income inequality, with the middle class expanding.
  2. Conflicting Headlines: Reports claiming rising inequality focus primarily on the income shares of the richest 1%, derived from the World Inequality Lab (WIL), often overlooking its methodological limitations.
• Limitations of WIL Estimates
  1. Underestimated Low and Middle-Income Shares: WIL assumes 80% of households spend more than they earn, leading to inflated estimates of top income shares.
  2. Income Share Adjustments: From 2017 to 2022, the bottom 50% income share increased from 13.9% to 15%, while the top 10% share fell from 58.8% to 57.7%.
  3. Ignoring Tax Impacts: Marginal tax rate reductions and improved tax administration since 2014 contribute to higher reported top incomes without necessarily indicating rising inequality.
• Post-Tax Income Realities
  1. Disproportionate Tax Contributions: The top 1% of individual taxpayers contribute 42% of total income tax, indicating significantly lower post-tax disposable income.
  2. Augmented Incomes for Low-Income Groups: Welfare transfers substantially enhance actual incomes for the bottom tiers, mitigating inequality.

 

Economic Factors Influencing Inequality

• Growth vs. Return on Capital
  1. Higher GDP Growth: The average GDP growth rate exceeds real returns on capital, favouring labour over capital and reducing inequality.
  2. Returns on Capital: Weighted real lending rates and adjusted returns on equity remain below GDP growth rates, promoting inclusivity.
• Role of Mutual Funds and Start-Ups
  1. Investment Benefits: Over 14% of Indian households benefit from mutual fund investments, with high returns from small-cap and start-up ventures.
  2. First-Generation Billionaires: India's booming start-up ecosystem has created numerous first-generation billionaires, demonstrating upward mobility beyond inherited wealth.

 

Improvements in Living Standards

• Near-Eradication of Extreme Poverty: NSSO data (2011–12 to 2023–24) highlights significant reductions in poverty and improved consumption patterns, particularly for the bottom 20% of households.
• Healthier Food Consumption
  1. Diverse Food Basket: Increased consumption of milk products, meat, fish, and fresh fruits, particularly in rural households.
  2. Access to Free Food Items: Welfare programs have further enhanced dietary improvements for economically disadvantaged groups.
• Vehicle Ownership Growth: Among the poorest 20% of households, vehicle ownership rose from 6% in 2011–12 to 40% in 2023, reflecting upward mobility.
• Higher Enrolment Rates: Gross enrolment ratios for SC and ST students show the highest increases, indicating better access to education for disadvantaged groups.

 

Way Forward: Implications for Sustained Inclusive Growth

• Focus on Equitable Distribution
  1. Improve methodologies for income distribution estimates to present a clearer picture of inequality.
  2. Enhance welfare transfers and ensure equitable access to resources for disadvantaged groups.
• Strengthen Economic Dynamism
  1. Promote start-ups and small-cap investments to foster wealth creation across broader segments.
  2. Reduce barriers to entry for mid-tier businesses to sustain competition and innovation.
• Supportive Governance
  1. Continue focusing on poverty alleviation through effective welfare programs.
  2. Encourage policies that prioritize labour-intensive growth to ensure broader participation in economic gains.

 

Conclusion

Improvements in living standards, poverty reduction, and educational gains demonstrate a move towards an equitable society. Consistent efforts are required to address the systemic gaps and maintain the momentum towards achieving Viksit Bharat.