India’s economy, one of the fastest-growing in the world, is currently being revived by a large spending plan passed by Congress in March – but meanwhile, the economy has been ravaged again by the second wave of Covid-19, and India’s striking farmers are considering reviving last year’s protests.
Spending and Current Financial Plans
According to Forbes, “Based on the OECD’s Economic Outlook 2021, the Indian economy contracted by 7.7% in 2020 as domestic consumption declined. Despite the downturn last year, the OECD has projected India’s economy to expand by 9.9% and become the fastest-growing G20 economy in 2021.” India’s $265 billion spending project was announced in March, and the government has taken some decisive steps in order to revive the Indian economy.
In addition to the spending package, finance minister Nirmala Sitharaman will be looking to double the amount spent on healthcare to 2.2 trillion rupees, increase the foreign direct investment (FDI) cap on the insurance sector, and allocated 200 billion rupees to recapitalize some state-run banks.
Agricultural in Decline, More Protests On the Horizon
Meanwhile, India’s protesting farmers are still holding space outside the capital, and recent reports from Al Jazeera and NPR found that more farmers are considering joining them for the ongoing protest. Last year, the farmer strike made headlines around the world as India’s agricultural sector was shaken by the passing of laws that would “moderate” the system, at a huge disadvantage to the farmers. The central government is concerned about the spread of these protests, which could once again bring economic growth to a halt, as agriculture is one of India’s largest money-making sectors.
“Once accounting for a third of India’s gross domestic product (GDP), the agricultural sector now makes only 15 per cent of India’s $2.9 trillion economies. More than half of the country’s farmers are in debt, with 20,638 dying by suicide due to debt and crop failures in 2018 and 2019, according to India’s National Crime Records Bureau,” stated Al Jazeera.
While farmers organizing the protests largely say that Modi has ignored the farmers, their protests, and their concerns, the Indian government is now focusing on other sectors that they can control.
India’s Economic Future
Sitharaman has put together a variety of financial panels that will be looking at taxation in several industries, and says India may even change some of its laws to allow new industries to add more to the GDP. For example, the federal government has put together a goods and services (GST) panel to look at the merits of raising or lowering taxes in certain industries as well as changing laws to allow new companies to flourish. One panel is examining legalizing online gambling to be taxed under new GST rates, another is considering taxing petroleum under a single national rate. Food delivery services may also face changes in the law as the government considers adding this new industry under the regulations of the restaurant industry (restaurants are currently taxed at a certain national rate, while food delivery apps are new enough that they’ve been excluded from these taxes until now). Solar projects are currently taxed at a very high rate, which has been preventing these energy sector businesses from expanding, and the panel may look at reducing these rates if it looks like it can become more profitable.
India’s biggest industry was once agriculture, but as the government has shifted to adopt more modern ideas, they are looking to expand other industries include manufacturing, services, and more digital industries. At the moment this is an issue as farms and agricultural jobs are the main points of income for most of the country’s rural population. Until these new financial measures can be implemented, the agricultural industry is likely to continue to decline without action from the government.