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Indian economy poised for long-term growth: experts

Demographic dividend, bustling market cited as advantages

Despite its structural weaknesses, the Indian economy is poised for long-term growth because of its advantages such as the demographic dividend and a bustling market, said economists at a seminar on ‘Turbulence in Indian economy: Disruptive innovation or structural weakness?’ held at the Indian Institute of Management, Kozhikode (IIM-K) on Saturday.

Tirthankar Patnaik, head of research at Japan-based Mizuho Bank, said what would work for India would be its demography. “India has the world’s youngest population. Half of the people of the country are aged under 30,” he said. This might sound like a problem with difficulty in job creation. But it would also mean that India had a large workforce and there was a huge market out there. So, the current turbulence could be transient. However, he said the structural weaknesses such as massive skill deficit, difficulty in land acquisition and issues facing banking systems could not be neglected.

Strong demand

Siddhartha Sanyal, chief economist at Barclays India, said the Indian economy enjoyed strong demand, which was unique.

“In today’s world, demand is lacking in many economies, including the advanced ones. But we are not able to meet the demand by boosting the supply,” he said. Now the government, policy makers and central bank were concentrating on long-term supply boosting mechanisms.

“We are now moving away from policies of populism where we used to have minimum support price hikes, rural employment development programmes, etc., to cater to nearterm demand boosting. The two major political formations have realised in the past few years that it is not what the country wants,” he added.

V.K. Vijayakumar, chief investment strategist, Geojit Financial Services, pointed out that turbulence in economy was normal and the question was how do we address it and what exactly was the nature of the turbulence.

“In November 2016, we had rather the most disruptive policy decisions taken in Independent India, arguably. Soon after came the implementation of the Goods and Services Tax. The economy was hit. The rate of growth of the Gross Domestic Product in the first quarter of 2017-18 came down to 5.7%, the lowest in recent times,” he said.

Fortunately, now we have recovered from the twin shocks. The economy is back to high growth, though there are disagreements and different views regarding the GDP figures. “However, right now we are facing the headwinds from the currency depreciation. Rupee is the worst-performing currency in Asia. The question is whether it is a structural problem or not,” Mr. Vijayakumar added. Subhasis Dey, associate professor of economics, IIM-Kozhikode, was the moderator.

(Source: The Hindu, October 27, 2018)