Indian Economy and external vulnerability indicators

Indian economy is much better placed than it was in 2013 with a strong political mandate and thereby improved business and consumer sentiment. The positivity was apparent in the stock market lift in 2014. However, the global economic environment is highly fluid and the growth will depend on the speed of pushing pending reforms and the pumping in domestic investment.

• Major nations of the world are going through a thick patch viz. Japan is in recession, Europe has weak economic prospects and even Chinese economy is heading for a slowdown. Such conditions warrant for a steady domestic demand to lift growth.
• Although a stronger US is good news for Indian exports but there are reasons for India to be vary in wake of interest rate hike as it will wind off tapering. This can further increase the gulf between India and US which will have effect on debt outflows.
• India has to revive its manufacturing sector, turn the private investment cycle and revamp domestic consumption. In absence of a global counter-cyclical policies and weak global demand, it is tough to achieve. It has to considerably reduce its import dependence by taking appropriate structural measures.
• Also, it has to work on its mining sector, initiate land reforms, implement GST introduction, etc. to achieve a higher growth in medium-term.