• The National Statistical Office (NSO) data states that the GDP growth rate was -23.8% during Covid-19 when compared to GDP of the same period in 2019-20.
• The imports had recorded their slowest growth in 2023 since 2020, primarily because of easing crude oil prices bringing down India’s import bills.
• Private consumption, the largest component of India’s final demand, with a modest growth of 7.5% in FY2022–23, had emerged as the weakest link in overall growth.
• The share of private consumption in GDP was the lowest in the past seven quarters, dragged down by weak rural demand.

Need for New Economic Policy:

• Based on NSO data growth rate of GDP, since 2015-16 declined annually, referred to by economists as The Hindu Rate of Growth at 3.5% growth rate in GDP.
• The Hindu Rate of Growth refers to the annual growth rate of India''s economy before the economic reforms of 1991, which averaged 4% from the 1950s to the 1980s. 
• The government widely publicized development but achieved the Hindu rate of growth similar to the socialist period of 1950-77.
• GDP growth rates rose for the first time to between 6% to 8% per year over the period of 1991-96 and 2004-2014.
• It had reduced state participation and increase incentives for capital and labour providers and achieved a higher and faster growth of the economy.

Challenges:

Economic issues:

• There is a potential deterioration of banks’ asset quality, delays in fiscal consolidation, difficulties in trade agreements, and the impact of below-normal monsoon seasons.
• The economy has been impacted by moderating demand and high inflation, leading to a slowdown in economic activity.
• Weakening credit-supported demand for capital goods indicates a decline in business investment.
• The services exports are insufficient to offset the trade imbalance in goods.
• Low labor productivity affects the competitiveness of Indian goods and participation in global value chains.

Inflation:

• CPI-based retail inflation is projected at 5.4% for FY24.
• The Reserve Bank of India (RBI) expects headline inflation to witness a spike in the near months on account of supply disruptions due to adverse weather conditions.
• Headline inflation is a measure of the total inflation within an economy, including commodities such as food and energy prices, which are volatile and prone to inflationary spikes.
• Constraints like weak global demand and monetary policy tightening to manage inflationary pressures, would limit real GDP growth to 6%.
• Inflation, especially for energy and food, has reduced purchasing power and household consumption, particularly in urban areas.

Global issues:

• There is anticipation that runaway inflation, aggressive policy rate hikes, and high commodity prices might topple a few major economies into recession in 2023.
• The growth moderation for India is premised on an ongoing global economic slowdown, tight monetary conditions, and elevated oil prices.
• Geopolitical tensions and weather-related shocks are key risks to India’s economic outlook.
• India’s growth prospects are strongly influenced by global developments, such as the increased import of energy and fertilizers from Russia.
• China’s easing of monetary policy has led to a depreciation of the Renminbi and cheaper products could increase India’s dependence on China for critical inputs and increase deficit.

Steps to be taken:

• There should be clear implementation economic objectives and priorities assigned to it.
• There ought to be a strategy on what should be incentivized and what should be deleted or discontinued.
• Resources by the government should be mobilized through indirect taxes and by liberal printing of currency notes.
• This is circulated by paying wages to the employment generated in extensive public works.
• The annual interest paid on fixed-term savings in bank accounts should be changed to increase purchasing power of the middle classes.
• Interest rates on loans to small and medium industries should be no more than 6% of the loans to in these sectors.

Accountability: increase production and employment

• The market system is not a free-for-all or an ad hoc measure as it has a structure with rules for transactions.
• Market system capitalism works as the principal driver of incentive and capital and its use for innovation raises factory productivity and the growth rate of GDP.

Deregulations:

• A totalitarian state like China allowed the socialist economic system to die and bring an economic market-based system.
• Deregulations does not mean rejecting government intervention for safety nets, affirmative action, market failure and creating a level-playing field.
• Democratic institutions have to be empowered to guard against public disorder arising from rapid de-regulation, like Russia post-1991.

Stake for the poor:

• The trade-off between the public sector, de-regulation and the sale of loss-making units causes decline in GDP.
• It can be tackled by increasing employment, through affirmative action and providing easy access to social security, and safety net.
• This creates a level-playing field in a competitive system, and ensures transparency, accountability, and trusteeship (philanthropy).
• Steps to reduce monopolistic tendencies will help in the formation of a democratic and harmonious society.
• It will enhance corporate governance to legitimize profit-making smoothly which drives the market system.

Environmental issues:

• Targeted policies are needed to address climate change and reduce emissions.
• India is vulnerable to extreme heatwaves, which cause loss of lives and economic costs.
• Reduce greenhouse gas emissions and improve infrastructure to prevent flooding.

Gender Equality:

• Gender equality requires progress in health, education, and access to capital for women.
• Policy efforts should incorporate gender considerations, and measures like childcare assistance, vocational training, and land rights enforcement to empower women economically.
• It can facilitate climate adaptation and mitigation investments.

India needs a new economic policy that is based on clear objectives, priorities, has a strategy to achieve targets, and spell out an intelligent and transparent resource mobilization plan to finance policies. India’s economic outlook involves navigating challenges to achieve sustainable growth. Addressing poverty, gender gaps, and climate change through targeted policies and investments will be crucial for India’s long-term development.