The Economy of any country is its backbone. The development of any country depends on it. The economy is defined as a social domain that emphasizes the practices, discourses, and material expressions associated with the production, use, and management of resources. Economic activity is spurred by production which uses natural resources, labor, and capital. It has changed over time due to technology and innovation. If any part of the economy is for its citizens, it is our job and responsibility to protect it.
Gross Domestic Product (GDP) represents the economic health of a country. It is the sum of a country’s production which consists of all purchases of goods and services produced by a country and services used by individuals, firms, foreigners, and the governing bodies. GDP fluctuates because of the business cycle. When the economy is booming and rising. Economists analyze GDP to find out whether the economy is in recession, depression, or boom.
When a country exports it brings money into the country, which increases the nation’s GDP. When a country imports goods, it buys them from foreign producers. The money spent on imports leaves the economy and that decreases the importing nation’s GDP. The imports are excluded from GDP because it is the production of a foreign country purchased by a domestic country.
The GDP of the nation is calculated by:
C= consumer spending
I= business spending
G= government spending
X= value of exports
M= value of imports
The Indian economy contracted by a record 23.9% in the April to June quarter, as the country went into the lockdown to control the spread of the coronavirus. Economists expect this to contribute to a contraction in annual GDP this year, which may be worst in the history of independent India. The financial services sector shrank by 5.3%. Trade, hotels, transport, and communication declined 47%, manufacturing shrank 39.3%, mining output fell 23.3%, electricity and gas dropped by 7%.
Some steps are being taken by the Indian government to enlivening figure for GDP :
New Industrial Policy: In the new Industrial policy most industries have been freed from licensing and other restrictions. The use of the latest technology has been given prominence in the new policy. Privatization is also going on. Free entry of foreign investment will attract foreign investment. Monopolies and Restrictive Trade Practices Act has been removed, the Foreign Exchange Regulation Act (FERA) has been replaced by the Foreign Exchange Management Act (FEMA). Efforts have been made to give importance to the small industries in the economic development of the country.
2. New Trade Policy
Due to liberalization, trade policy has undergone tremendous changes especially the foreign trade has been freed from the unnecessary controls.
3. Solutions of Fiscal Deficit
In order to handle the problem of fiscal deficit, basic changes were made in the tax system. The tax procedure has been simplified and a heavy reduction in the import duties has been implemented.
In these reforms, the banks have been allowed to decide the rate of interest on the amount deposited. New standards have been laid down for income recognition for the banks. Permission to open banks in the private sector has also been granted. Our government must take on the economic challenges that the country faces.
The four major engines of the economy are private investment, exports, private consumption, and public investment. GDP growth has been slowing. The crucial automobile sector is hurting. Agricultural distress, lack of fiscal macro durability, serious concerns around unemployment, and a stubborn investment drought in the private sector are among a slew of challenges that the new government must tackle head-on.
India has become the fifth-largest economy in 2019. Nearly 60% of India’s GDP is driven by domestic private consumption and continues to remain the world’s sixth-largest consumer market. In India, the government should give priorities to public sector reform, infrastructure, agricultural and rural development so that the economic condition can improve.