Economic Growth Trends

Context:

• The CRISIL Report indicates that the Indian economy might grow more slowly in 2024-25.

What is CRISIL?

1. CRISIL i.e. Credit Rating Information Services of India Limited is a leading analytical company based in India.
2. They provide ratings to companies and government bodies which helps people make smart financial decisions such as investment.

What has been the growth trend of the Indian economy?

1. World Bank Data shows the following trend:

Year	Growth Rate
2018	6.5%
2019	3.9%
2020	-5.8%
2021	9.1%
2022	7.2%

2. The above graph shows that the Indian Economy has gone through the following phases:

Period	Phase	Explanation	Reasons
2018-19	Economic Slowdown	A period of reduced economic activity with a decline in growth rates, employment and consumer spending.	Global economic slowdown which impacted demand for Indian exports and overall economic activity. Also, the effects of Demonetisation and GST implementation led to a slowdown in domestic consumption.
2019-20	Technical Recession	A period of 2 back-to-back quarters of negative economic growth, indicating a short-term contraction in the economy.	COVID-19 led to lockdowns resulting in reduced economic activities.
2020-21	Economic Recovery	A phase where the economy starts to grow again with increasing economic activity, employment and overall improvement.	Government measures such as an economic package in the form of Atmanirbhar Bharat Abhiyan pushed self-reliant growth. Also, India's strong domestic market helped it grow steadily.
2021-22	Economic Stability	A state where an economy experiences consistent growth without many ups and downs	Foreign Direct Investment also contributed to the stability (around $80 Billion in 2022) Government investments in infrastructure projects like roads, railways and digital connectivity improved logistics and boosted growth.

3. Hence, it can be said that the Indian Economy has seen a V-shaped recovery i.e. a quick and strong bounce back of an economy after a sharp decline.

What are the major challenges for the Indian Economy at present?

1. Unemployment: High unemployment among the youth, especially among the graduates - around 42%. (According to State of Working India Report 2023)
2. Income Disparity: The top 10% of the population gets 57% of national income. (According to UNDP)
3. Inflationary Pressures: Rapid economic recovery can sometimes lead to increased demand for goods and services, potentially causing inflation.
4. Sustainability: Economic recoveries often focus on rapid growth, sometimes at the expense of environmental sustainability. Industries may prioritize short-term gains over long-term environmental impact, leading to pollution, resource depletion and climate change.

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