UPSC Mains 2019 · GS III · Q2 · 10 marks · 150 words

Do you agree with the view that steady GDP growth and low inflation have left the Indian economy in good shape? Give reasons in support of your arguments.

हिन्दी में

क्या आप इस मत से सहमत हैं कि सकल घरेलू उत्पाद (जी० डी० पी०) की स्थायी संवृद्धि तथा निम्न मुद्रास्फीति के कारण भारतीय अर्थव्यवस्था अच्छी स्थिति में है? अपने तर्कों के समर्थन में कारण दीजिए।

Macroeconomic Indicators

How a topper answered the closest question

Toppers wrote this one in a test series: “Inflation is said to be a necessary evil for economic growth. Critically examine the statement in the context of rising inflation amid COVID-19 pandemic”

Saksham GoelAIR 27 · CSE 2021 · 144 wordsTheir whole copy

Opening · a definition

Inflation or general price rise is, according to Kaushik Basu (former CEA), the "prime political maladie".

Body · points and prose

The "necessity" of inflation in COVID-recovery

(1) Keynsian economics To boost economy:-

Diagram
[↑Government Spending] -> [Excess supply of money] -> [Excess money chasing same amount of goods] -> [Inflation] [↑Expansionary monetary policy] -> [rate↓ interest] -> [Excess money] -> [Excess money chasing same amount of goods] -> [Inflation]

(2) To attract investments, the rate of growth needs to improve about rate of interest for this, inflation is a necessity.

(3) For private sector to gain profits and infrastructure-led growth, multiplier

effect of government spending is required

"The evil" - Challenges of high inflation

(1) Potential of crowding out of investments (2) Reduced Exports leading to ↓GDP (3) High inflation is disproportionately more burdensome for the poor and marginalised (4) High inflation is also poor for the creditors and banks (5) Inflation hits harder due to high unemployment

Close · a way forward

The expansionary fiscal and monetary policy measures along with must be counter balanced with an inclusionary approach and rolled back and fine tuned as the economy recovers.

How toppers approach this question, and more on its topic: open the question.

Toppers’ answers to other close questions

Source: UPSC, Civil Services (Main) Examination 2019, General Studies Paper III, Q2. The paper on upsc.gov.in. Themes and links to toppers’ answers are by UPSC Grade, not by UPSC.