Q2. Do you agree with the view that steady GDP growth and low inflation have left the Indian economy in good shape? Give reasons in support of your arguments.  

Model Answer:

Introduction

The Indian economy has progressively shifted from a phase of high and volatile inflation to one marked by more stable and low inflation, alongside steady GDP growth. Low inflation fosters economic stability, which encourages saving, investment, and growth while maintaining international competitiveness.

Body‍

Benefits of Steady Growth and Low Inflation:

  1. Steady growth attracts external investments like FDI and FII, while low inflation increases disposable income, facilitating asset creation through savings. 
  2. Low inflation promotes stability, security, and confidence, encouraging investment.
  3. High inflation erodes the income of the poor; low inflation raises disposable income, boosting demand and investment.
  4. Low inflation and high GDP growth have enhanced the competitiveness of Indian exports.
  5. Low inflation has kept interest rates stable, benefiting the corporate sector.
  6. Steady growth enabled the government to implement reforms like GST.  

‍

Limitations of Steady GDP Growth and Low Inflation:

  1. Low inflation raises real interest rates, potentially suppressing investment.
  2. Lower nominal GDP growth can reduce tax revenue, forcing cuts in government spending to meet fiscal targets.
  3. High economic growth has not significantly generated employment; higher unemployment reduces demand and investment.
  4. As investment and consumption slow, economic growth falters, reducing tax revenues and exacerbating bad loans, straining bank balance sheets.
  5. Low inflation has reduced returns for farmers, aggravating rural distress and agrarian crises. In extreme cases, negative inflation risks deflation.
  6. Economic growth and inflation can conflict; rapid growth often increases inflation, but sustainable growth with increasing productive capacity can achieve low inflation and positive growth simultaneously.

Conclusion

In conclusion, while steady GDP growth and low inflation have strengthened the Indian economy by enhancing stability, encouraging investment, and facilitating asset creation, challenges such as unemployment, reduced farmer returns, and potential economic weaknesses must be addressed for sustainable progress.

‍

Instant Mains Evaluation with SuperKalam

✅ Now that you have gone through the model answer, try practicing and writing it in your own words and evaluate it instantly with SuperKalam here - Evaluate Mains Answer instantly

Read more blogs