India’s twin surplus problem

Mains Paper: 3 | Economy
Prelims level: surplus problem
Mains level: Twin deficit problem in the macroeconomics space

Context

•  India’s productivity challenge is, in part, due to its inability to produce on scale.
•  It is due not just to inadequate capital investment but to underinvestment in life skills combined with improperly formed attitudes.

HSBC projection

•  The HSBC has projected that India’s gross domestic product (GDP) would reach the size of about $5.9 trillion by 2030 rather than $10 trillion that Niti Aayog had projected for 2032.
• This implies an annual compounded growth rate in real GDP of 6.2%. Around the same time this story appeared in print.
•  There was also a report that the government of India had rejected the findings of the World Bank’s Human Capital Index launched just this month because, according to the government.
•  Many transformational initiatives ignored that have undertaken to improve India’s human capital.
•  The HCI had placed India at 115 out of 157 with some of its neighbouring countries doing better.
•  The government may be right that it is doing all the right things to make India’s children productive citizens in future.
•  But, the World Bank is probably onto something in throwing the spotlight on India’s low productive potential.
•  India is a productivity-challenged nation because it is an attitude-challenged nation.
•  This thing called infrastructure has two components. There is hard infrastructure. That is mostly about connectivity transport and internet.
•  That will be addressed sooner or later because the shortcomings are evident.
•  The issues cannot be covered up for too long. Someone has to take ownership and responsibility and fix the problem.
•  It happens eventually but after much expenditure of effort material and psychological.
•  That is why it may be more important to focus on India’s soft infrastructure problem. That is the second component of infrastructure. It largely reflects our workplace attitudes.

Way format

•  This is not just a government problem but it is a pervasive national problem.
• Power is exercised not to empower but to enfeeble and emasculate.
•  This breeds mistrust and mistrust lowers productivity and output.
•  Trust is the lynchpin of economic activity. Management by empowerment, empathy and exception remains the exception.
•  It subordinates practice escalation rather than focus on execution.
•  India’s productivity challenge is, in part, due to its inability to produce on scale and that, in turn, is due not just to inadequate capital investment but to underinvestment in life skills combined with improperly formed attitudes.
•  The low Human Capital Index score may be reflecting more the latter than the former.
•  That may be why HSBC’s projection of India’s economic size in 2030 is more realistic than that of Niti Aayog’s and yet still excessively optimistic.

Online Coaching for UPSC PRE Exam

General Studies Pre. Cum Mains Study Materials

Prelims Questions:

Q.1) Regional Comprehensive Economic Partnership (RCEP)

1. It is a Free trade Agreement (FTA) between member states of the Association of Southeast Asian Nations (ASEAN) and SAARC members
2. It is seen as an alternative to the Trans-Pacific Partnership trade agreement
3. Both India and China are part of RCEP
Select the correct code
a) 1 only
b) 2 and 3 only
c) 2 only
d) 1, 2 and 3
Answer: B

Mains Questions:
Q.1) The HSBC project is far more ahead about the NITI AAYOG projection. In this context describe the important highlights about the Indian economic development.