LIVE TV
ZEE Business
ZEE BUSINESS
हिंदी में पढ़ें  हिंदी में पढ़ें
Live TV
Live TV
  • Home
  • Budget 2021
  • Personal Finance
    • PPF
    • Mutual Funds
    • Income tax
    • EPFO
    • Income Tax Calculator
    • Personal Loan Calculator
    • Car Loan Calculator
    • Home Loan Calculator
    • SIP calculator
    • SWP Calculator
    • MF Returns Calculator
    • Lumpsum Calculator
  • India
    • Companies
    • Property
    • Startups
    • Uidai
  • Economy
    • Aviation
  • Tech
    • Mobiles
    • Apps
  • Auto
    • Cars
    • Bikes
  • Markets
    • Commodities
    • Currency
  • Jobs
  • Indian Railways
  • World
    • Economy
    • Politics
    • Markets
  • videos
  • photos
  • Authors
  • More ...
    • VIDEOS
    • PHOTOS
Read in App
Business News » India News

India's economy trumped Britain in 2016

  • Twitter
  • Facebook
  • Linkedin
  • whatapp
  • View in App
India's economy trumped Britain in 2016
Prime Minister Narendra Modi with British Prime Minister Theresa May greets during a bilateral meeting at Hyderabad House in New Delhi. Image Source: IANS
Written By: PTI
Updated: Mon, Jan 02, 2017
10:48 am
PTI
RELATED NEWS
RBI Monetary Policy Review: Shaktikanta Das led panel keeps policy rates unchanged RBI Monetary Policy Review: Shaktikanta Das led panel keeps policy rates unchanged
Bharat Bandh Today: Check FULL List of where it will impact daily life Bharat Bandh Today: Check FULL List of where it will impact daily life
Ceasefire: Hotline contact! Modi government issues statement after discussion of India-Pakistan's DG Military Operations Ceasefire: Hotline contact! Modi government issues statement after discussion of India-Pakistan's DG Military Operations
Earthquake in Uttarakhand Today: Strong quake of magnitude 4.0 shakes hill state, spreads panic Earthquake in Uttarakhand Today: Strong quake of magnitude 4.0 shakes hill state, spreads panic
LPG Price Today: BAD News! Govt hikes cooking gas price; check new price that you will have to pay from today LPG Price Today: BAD News! Govt hikes cooking gas price; check new price that you will have to pay from today

It is no mean achievement when Indian economy flexed its muscles in 2016 and briefly nosed ahead of Britain -- its once colonial master. But the honour was fleeting as India quickly fell back to the sixth-largest position, with considerable headwinds from demonetization and delay in GST rollout queering the pitch.

At the start of 2016, everything looked hunky-dory as the country took pride in being the world's fastest-growing major economy, but the momentum seemed to have petered out by the end of the year as spending took a hit and industrial activity faltered with the junking of 86% of currency in circulation, leading to an across-the-board downgrade in growth projections.

The first half saw India being called the bright spot and rightly so -- in a world searching for growth engine. The government moved in to reconfigure its economic architecture through new institutional mechanisms like the one to tackle monetary policy.

But Brexit, protectionist signal from Donald Trump fresh from the surprise US presidential election win, the Syrian turmoil and an uptick in oil prices partly reversed some of the gains and capped 2016 as a tumultuous year.

The economic agenda for 2017 remain clear. Finance Minister Arun Jaitley needs to impart a big push to the economic activity in the budget coming up in a month -- through not just raising spending on socio-economic infrastructure but dealing with the fallout of the cash recall exercise.

The need of the hour is a 'feel-good budget that will give people something to look forward to while taking the reforms agenda to the logical conclusion, including a schedule for the landmark GST launch that can be honoured.

Once expected to overtake the UK GDP in 2020, the moment arrived early enough in mid-December on the back of a near 20% drop in the value of the pound after the shock Brexit vote.

This squeezed UK's 2016 GDP to 1.87 trillion pound ($ 2.29 trillion) as against India s $ 2.3 trillion (Rs 153 lakh crore). But the change of fortunes came when forex rates realigned and the UK economy stood at $ 2.3 trillion compared with $ 2.25 trillion of Indian economy as the year drew to a close.

The jury is still out as India is expected to bridge the gap in the new year even if it were to grow at a lower pace of 7% and UK s growth is projected at no more than 2% through 2020.

Although economists are wary of comparing the relative size of economies using the volatile market exchange rates and prefer purchasing power parity instead, which adjusts the differences in local purchasing power, India's fifth spot behind the US, China, Japan and Germany speaks volumes.

The single-biggest spoiler was the cash ban, which has triggered fears of a blow to consumption, particularly in rural areas, with the dominant services sector being the worst hit. Also, industrial output and investment may feel the pinch which coupled with job losses and a drop in demand could add to the disruption.

Demonetization also acted as a speed breaker in the planned take-off of the Goods and Services Tax, the biggest piece of reform since Independence, from April 1. States that saw their revenues being affected by demonetization have stalled a consensus on supplementary legislations, and the April 1 schedule looks a tall order now.

But to give credit where it is due -- Prime Minister Narendra Modi and Finance Minister Jaitley -- there was never a moment that saw commitment to reforms slipping. After cleaning up the economic mess left by the previous UPA government, the Modi government has bitten the bullet and started carrying out tough structural and deeper reforms.

Despite this, private investments are still hard to come by in a big way and loans to corporate remained subdued throughout the year.

Gross domestic product, by some estimates, has slowed to 6.5% in the third quarter, from 7.3% in July-September.

The government is confident that these are only short-term blips, and in the long run, India is well poised to hop on to the higher growth trajectory.

While the economy grew by 7.2% in the first half of the current fiscal, the Reserve Bank of India (RBI) downgraded projections for 2016-17 to 7.1%, from the previous 7.6%. Fitch too lowered it to 6.9% from 7.4% while S&P had slashed its projections of 7.9% to 6.9% even before the November 8 demonetization announcement.

While inflation was in check and trade and capital flows remained largely unaffected, exports - often seen as the engine for growth - have been tepid. Public investment has been robust, but private investment is yet to pick up.

Industrial activity has been weakened by demonetization, which has taken a toll on consumption demand, the mainstay of the economy.

From the biggest change in RBI's eight-decade history by adopting an inflation-targeting framework and moving to a collective interest-rate decision making to overhauling of the century-old bankruptcy law to concerted efforts to make India a 'one nation and one market' through GST, the transformation has been complete that laid the pitch for long-term structural benefits.

The new bankruptcy code will allow quick closure of businesses gone bad and prevent build-up of NPAs, which are already are at a 16-year high of 12%.

As the reforms momentum picked up, India overtook the UK economy in absolute terms in mid-December though it is still less than one-fifth of the UK in per capita terms. Though the glory was short-lived, it did highlight India's arrival on the global stage as an economic powerhouse that one can afford to ignore at its own peril.

More importantly, it has been able to shed any residual notion of colonial inferiority.

This is reflected in getting tax havens like Mauritius, Cyprus and now Singapore to redraw tax avoidance treaties with India, which is also negotiating a trade deal with the UK, post Brexit.

The way government handles the after-effect of demonetization and the all-crucial Budget will now shape the narrative for the economy in 2017.

Get Latest Business News, Stock Market Updates and Videos; Check your tax outgo through Income Tax Calculator and save money through our Personal Finance coverage. Check Business Breaking News Live on Zee Business Twitter and Facebook. Subscribe on YouTube.

TAGS:
indiaBritainEconomyBrexitPM ModiTheresa MayArun JaitleyGDPGross Domestic ProductDemonetisationGST
RELATED NEWS
RBI Monetary Policy Review: Shaktikanta Das led panel keeps policy rates unchanged RBI Monetary Policy Review: Shaktikanta Das led panel keeps policy rates unchanged
Bharat Bandh Today: Check FULL List of where it will impact daily life Bharat Bandh Today: Check FULL List of where it will impact daily life
Ceasefire: Hotline contact! Modi government issues statement after discussion of India-Pakistan's DG Military Operations Ceasefire: Hotline contact! Modi government issues statement after discussion of India-Pakistan's DG Military Operations
Earthquake in Uttarakhand Today: Strong quake of magnitude 4.0 shakes hill state, spreads panic Earthquake in Uttarakhand Today: Strong quake of magnitude 4.0 shakes hill state, spreads panic
LPG Price Today: BAD News! Govt hikes cooking gas price; check new price that you will have to pay from today LPG Price Today: BAD News! Govt hikes cooking gas price; check new price that you will have to pay from today

LATEST NEWS

CBSE exams 2021 cancellation demand: Board has big update for Class 10, 12 students

Stock Market Outlook: Nifty, Bank Nifty support range REVEALED; Anil Singhvi says global cues, corona cases and FIIs data will be crucial

FD fraud: SBI issues alert for customers, says avoid THESE things or else you will lose money

Indian Railways to provide service as per demand; 1402 specials, 5381 Suburban trains already in operation, says Railway Board chairman

India leads US and China, administers 100 million COVID-19 vaccinations doses in 85 days

Gold Price outlook, correction, resistance and target—EXPLAINED! This is what Experts say about yellow metal in near to medium term

7th pay Commission: This is what Centre said about pending DA installments; staffers to get it by 'this' month

Gold price: Resistance, support for MCX Gold REVEALED, check crucial levels

NURECA Share Price hits 20% UPPER CIRCUIT: Know the reason WHY

Daily Covid-19 cases spike to new record, nears 1.5 lakh infection; Uddhav Thackeray calls all-party meet to review corona situation in Maharashtra

  • India News
  • World News
  • Companies News
  • Market News
  • Personal Finance News
  • Technology News
  • Automobile News
  • Small Business News
  • Income Tax Calculator
  • Live TV
  • Videos
  • Photos
  • Author
  • Rss Feed
  • Advertise with us
  • Privacy Policy
  • Legal Disclaimer

Latest Trending Updates

  • EPFO
  • Budget 2020
  • Income Tax Return
  • Auto Expo 2020
  • Home Loan
  • Business News

Trending Topics

  • Income Tax
  • income Tax Calculator
  • 7th Pay Commission
  • Reserve Bank of India
  • GST
  • Latest Business News

Follow us on

zeebiz
zeebiz

Partner Sites

  • Zee News
  • Hindi News
  • Marathi News
  • Bengali News
  • Tamil News
  • Malayalam News
  • Gujarati News
  • Telugu News
  • Kannada News
  • DNA
  • WION
Copyright © Zee Media Corporation Ltd. All rights reserved