From a layman perspective with regard to Indian Economy:
Current Challenges:
- High inflation – More demand than supply, so prices go up
- A low GDP – Standard of living will be low
- A weak currency – Imports will be costly
- A rising current account deficit (CAD) – amount we still owe to other countries. Majority is because we import gold and crude oil
Solutions:
A. Investments:
A country needs investments from its in house companies and foreign investors. Investments not only bring capital, technology improvements and ideas to markets; they also bring jobs. Because of these factors companies earn profits. Government gets opportunities to improve the countries infrastructure (well, even after the unofficial “personal expenses”).
Technically, the increase in investments, especially in capital goods (office buildings, office infrastructure) enables more output of consumer goods to be produced and eventually standards of living can increase.
It ‘s a hope when people like Indira Nooyi says “PepsiCo is going to make an investment of Rs 33,000 crore in India between now and 2020”
ICICI Bank Managing Director, Chandra Kochhar says “Finally what we need to focus on is growth in the country,” she said. “It’s the investment story that has fallen off currently. What we really need is a much more conducive environment.”
B. Controlling Inflation
With a trade-off between the investments and the purchasing power of commodities: new RBI governor, Raghuram Raja hiked the interest rates so as to y bring down inflation levels as it limits the money supply of rupee available in the market.
C. Controlling CAD
Increase in GDP helps CAD to decrease. We can predict crude oil price, which gives edge on controlling CAD.
Conclusion
With good investments being major factor for improving economy, RBI reforms will help the Indian economy.
Related articles
- Why Indian economy is primed to boom now (profit.ndtv.com)
- At last, some good news for the Indian economy (rediff.com)
- Twin DEVILS that have eroded the Indian economy (rediff.com)
- No business can survive if every decision is questioned: Chidambaram (dnaindia.com)
- P Chidambaram confident CAD will be curbed to below $60 bn (dnaindia.com)
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