India | Economy | GDP | India Power | 08th October 2022 | Virtual Wire
Every Indian is celebrating the 75th anniversary of Indian independence and the surpassing of the UK’s GDP by Indian GDP escalated the happiness of indian but only rising GDP doesn’t show that the standard of living of every individual is rising at a fast pace.
GDP per capita of India is only $2500(nominal) which is approximately one-fifth of china and one-twenty-fifth of America. India’s per capita is below that of Bangladesh, SRILANKA, and Bhutan and even below than that of some sub-Saharan countries. Rising economic inequality is one of the obstacles to the development of the country. According to the world inequality report 2022, the gap between the individual's average income of the top 10% and the bottom 50% of individual within countries has almost doubled & Top 1% hold more than one-fifth of the total national income. Even after independence 25 crore, people live below the poverty line. These facts are showing how much struggle poor & middle-class family has to do and this becomes intolerable with rising and sustaining high inflation.
From February 2022 onwards inflation has been above RBI’s upper tolerance level of 6%. For poor people, it’s very hard to even meet both ends. They generally can’t understand the reason for their cause. Is RBI’s policy only responsible for price stability and is price stability the only target of the Central bank (RBI)? The answer to both these questions is no. There are a lot of external factors (Russia- Ukraine war, rising oil prices by OPEC) that also change with time so rbi take cognizance in the next meeting. During lockdown period Opec countries incurred huge losses and now to maintain loss planning to cut oil production which will affect the fiscal health of our country the current account deficit inflation rate will also increase at a faster pace.
The rising interest rate by the USA is also creating pressure on the rupee and investors are now investing in the USA to reap the benefit of rising interest. Rbi to nullify the effect of the USA’s rising inflation also hiking the Repo rate. Rbi may Continuously increase the repo rate and in only 4 Month repo rate has been increased by 1.9 Basis points. Rbi’s governor shakti Kant das after 38th MPC said that within 2 years india’s inflation would be around 4% and India will grow at 8 %.
We can expect that inflation in a few years will be between the rbi’s tolerance level but Sustain growth will take time. India now needs to increase their expenditure in the healthcare sector apart from education (NPE-2020). According to some economists, India will be the second-highest economy in the world and per capita is also expected to rise.