10 challenges for India to reach 2050 potential
“In our latest annual update to our Growth Environment Scores (GES), India scores below the other three BRIC nations, and is currently ranked 110 out of a set of 181 countries assigned GES scores. If India were able to undertake the necessary reforms, it could raise its growth potential by as much as 2.8% per annum, placing it in a very strong position to deliver the impressive growth we outlined,” it says.
Here are the 10 things for India, as outlined by Goldman Sachs, to achieve its 2050 potential:
India’s governance problems overarch all its other problems. Without better governance, delivery systems and effective implementation, however, India will find it difficult to educate its
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IT has given major benefits to a broad variety of countries, ranging from ‘developed’ countries (such as New Zealand, Sweden and the UK) to ‘developing’ ones (such as Brazil, Korea and South Africa). For India, there are probably broader powerful benefits,” it says.
India’s gross fiscal deficit remains one of the highest in the world and, recently, government liabilities have been increasing at an alarming rate.
Goldman Sachs estimates that the overall government deficit stood at just under 6% in FY2008. In FY2009, this may accelerate to above 7%, due to a large debt-waiver for farmers, a big wage hike for civil servants, increasing fertiliser and oil subsidies, and higher exemptions on income tax.
At such high levels, government borrowing crowds out private-sector credit, keeps interest rates high, adds to already high government debt, and becomes a key source of macro vulnerability.
Therefore, a medium-term strategy for fiscal policy, which reduces the overall deficit to a sustainable level, is critical for India.
India’s financial sector remains small and underdeveloped. The state still dominates the sector, holding 70% of banking assets, a majority of insurance funds and the entire pension sector.
Additionally, markets are lacking in corporate debt, currency and derivatives. This leads to a lack of credit and low financial savings. Total credit, at 50% of GDP (although increasing rapidly in recent years), remains well below that of its Asian
A fiscal deficit is when a government's total expenditures exceed the tax revenues that it generates. A budget deficit can be cut by either reducing public expenditure or raising taxes. In this essay, I am going to analyse the benefits and costs of increasing tax rates to reduce fiscal deficits instead of cutting government expenditure.
they site that since the 1960's there has only been three!instances (small ones at that) of surpluses in the total government (180). Right now these deficits are not a problem because the rate in the growth of the income is greater than the rate at which the debt increases, but there is no guarentee this will continue so the growth of the debt must be in check now.
Overspending is a pertinent problem facing the lawmakers in Congress. In 2012 discretionary spending reached $1.3 trillion and mandatory spending $2 trillion, while only bringing in $2.5 trillion in revenue. Since the turn of the century back in 2000, non-mandatory spending by the government has topped out a whopping $16.1 trillion just in the past 13 years (Boccia, Frasser & Goff 2013). This persistent overspending on programs and services that are not necessary to the functionality of the country is what is causing the deficit to rise year after year. To remedy this issue the government must either increase the revenue it brings in through taxes and trade or reduce the amount of money it spend or perhaps even both. In 2012 thirty-one cents of every dollar that Washington spent was borrowed (Boccia, Frasser & Goff 2013). Most of which went to large programs such as Social Security and Medicare and if these large, growing programs, or just the budget in general, do not undergo financial reform it could spell disaster for the economy and fiscal state of the nation.
The federal budget deficit is a much discussed and little understood subject in American politics. The current recession has dramatically decreased tax revenues, driving the United States federal government to increase spending in an attempt to stabilize the economy. As a result the current federal deficit is at over $1.3 trillion dollars. This is approximately $47,754 per U.S. citizen or $137,552 per U. S. taxpayer (U.S. Debt Clock: Real Time, 2012).
Federal debt has been increasing for at least the past ten years. Currently, federal debt is $19,929,184,161,352.13 (Chantrill). The national debt has nearly doubled throughout Obama’s presidency and President elect Trump’s ideas do not look promising for change. It is estimated that Trump’s tax cuts will raise federal debt by $7.2 trillion within the next decade (Mauro). Many debt crises have occurred because of declines in growth. When
The total U.S. budget deficit for this year is estimated to be $514 billion, compared to $1.4 trillion in 2009 (The Budget and Economic Outlook: 2014 to 2024, 2014). Over the last few years, the federal budget deficit has declined, and is projected to continue to decline this year and leading into 2015 (The Budget and Economic Outlook: 2014 to 2024, 2014).
They now exhibit a challenge in terms of debt, deficit and surplus. The national debt and deficit possess distinct definitions. The budget is the amount of money that the government works with within a given fiscal year and allocates to the different programs. The deficit is when expenditures exceed revenue and is added to the debt at the end of the year. In the last ten years we have experienced enormous deficits that may communicate to the international community that the United States might have trouble producing a balanced budget. This is an accumulative effect as the national debt is combined with the debt held by federal securities outside and inside the government and the public. Foreign country debt is included in the national debt as of March 8th tops $16 trillion dollars. Debt owed to foreign countries like China and Japan equates to a little over $1.1 trillion. Yet, despite the United States’ owing large amounts we are still considered financially sound because of our credit rating. According to Thompson from CNN Money, the United States’ credit rating is in jeopardy of being downgraded because of a weak debt ceiling (Thompson, 2013). This may increase the risk level of investing in the United States.
If the government spends a dollar on bread and then a baker uses part of that dollar to buy flour. The flour distributor uses part of that to pay the truckers. Then the original dollar of the government spending becomes in effect more than a dollar. In practice the multiplier for government spending is not very large [1]. With each dollar of government spending the GDP increases by only 1.4 dollars [1]. Government spending and taxes are not separate issues. The government can only pay off its debt and expenditures by increasing the taxes. A study [2] suggests that "an exogenous tax increase of one percent of GDP lowers real GDP by roughly three percent", a phenomenon likely caused by the fact that "investment falls sharply in response to exogenous tax increases" [2]. Thus, what seems to be a course out of recession may actually be a road into another one.
We have a long story of debt, but it seems no one has been able to make it better. If the debt is increasing over time, the government has a budget deficit. Charles C. Turner, et al, defines the deficit as spending that exceed a revenue (482). In history, basic deficit or debt was usually from over spending from a war and economic issues like a recession or depression. Then the government had a budget deficit almost every year “between 1970 and 1997,” but the tax cut and more spending on defense by President Reagan in 1981 added more growth to the deficit. Also, another cause is from reducing of productivity seem in the GDP and lower tax rate (tax cut) (483). Even when the government had some budget surplus, still, it could not cover the debt. In 2012, the debt grew “over $ 16 trillion,” (482-483) and has increased more in recent year plus “2.9 percent” of the budget deficit in 2016 (The 2016 Long Term Budget Outlook, 2). To manage the economic depression, sometime policymakers cut the taxes and increase spending again by putting more money into the private sectors (Turner, 483); therefore, government goes further with the budget unbalancing. There are several reasons that lower the tax rate will not reduce the budget deficit closer to a balance.
The National Debt consists of the total debt accrued by local, state and federal. Public debt is essentially the federal debt, thus compiling the staggering number that already exists. The debt deficit to me is astonishing. Currently, the total public debt in the United States, as of December 16, 2015, is $18,788,138,221,346.49. This includes $13,600,726,418,253.26 debt held by the public and $5,187,411,803,093.23 by intergovernmental holdings (usgovermentdebt, 2015). High GPD is not anything new to the United States. The all-time high was 121.70 percent ($18827323.00) in 1946 and a record low of 31.70 ($253400.00) percent in 1974 (United States Government Debt to GDP, 2015). The way we are spending, and the debt we are accruing, it would
Globalization has been an integral part of India’s progress. It has opened up new avenues for growth.
As long as the deficit is in proportion to GDP or Gross Domestic Product, the sum of a country’s goods and services, there is no significant fiscal risk to the economy. However there is a counter-argument that government deficits do matter. The argument is that if interest rates were to go up even a quarter point then that would lead to the need to take out even more debt to pay off previous interest payments. This would lead to the need to decide whether to decrease current spending on other programs such as healthcare or infrastructure to compensate for the new interest payments, or to maintain current spending and simply borrow more debt without attempting to curtail spending.Following the first would hurt economic growth and increase inequality, but following the latter would lead to the debt climbing higher at an increasingly fast rate that would risk causing massive inflation. Both sides make valid points.
The deficit was expected to increase another 20 per cent in 2004, to US $150 billion. http://goliath.ecnext.com/coms2/summary_0199-3700728_ITM
Throughout most of the country’s history, the United States’ federal government maintained a reasonable level of national debt. For example, the total national debt in 1981 was $998 billion. Since then, however, the government has generated significant budget deficits, and the level of debt has risen to $16.7 trillion in 2013 (Calleo, 39). Budget deficits are caused
Aggregate Growth Rates. Low or declining aggregate growth rates often weaken the debt-servicing capacity of domestic borrowers and contribute to increasing credit risk. Recessions have preceded many episodes of systemic financial distress.