WEAK
CURRECY: ECONOMY
NEWS:
Chief Economic Advisor (CEA) Urges India Inc to Move Beyond Weak Currency
Reliance
WHAT’S
IN THE NEWS?
The Chief Economic Advisor emphasized avoiding
over-reliance on a weak currency for exports, advocating instead for productivity,
R&D, and quality improvements. The PLI Scheme supports domestic
manufacturing, reduces imports, and boosts economic growth through
performance-based incentives.
Avoid
Over-Reliance on Weak Currency
·
Temporary Advantage: Weak currency can make exports cheaper temporarily.
·
Long-Term Competitiveness: Focus should be on productivity, research and
development (R&D), and quality improvement to sustain competitiveness.
·
Historical Lessons: India and other developing countries have used weak currency to shield
inefficiencies instead of addressing them.
·
China’s Strategy: China combined weak currency with productivity gains to enhance export
competitiveness.
Global
Exchange Rate Policies
·
Industrial Tools: Many nations use exchange rates to achieve industrial goals, prompting
reactions in the global economy.
·
Shift in Global Dynamics: Reliance on global GDP and export growth to drive
domestic exports is less viable due to de-globalization trends.
Recommendations
for India Inc
·
Human Capital Development: Investing in education and skills is critical for
industrial and economic growth.
·
Industrial Transformation: Achieving higher growth requires industrial
growth, affordable energy, and resolving energy cross-subsidization issues.
·
Export Growth: India’s
export performance improved in FY 2024 compared to FY 2023.
India’s
Economic Growth and Challenges
·
Economic Growth: India’s average annual growth rate (2013-14 to 2023-24) was 5.9%.
·
Industrial Growth: Critical for achieving higher economic growth.
·
Job Creation:
Addressing employment needs for a 1.4 billion population is crucial.
Production-Linked
Incentive (PLI) Scheme
Objective:
·
Boost
domestic manufacturing.
·
Reduce
import dependence.
·
Spur
job creation.
·
Enhance
economic growth and India’s position as a manufacturing hub.
Implementation:
·
Overseen
by respective Ministries/Departments.
·
Focuses
on sectors such as electronics, pharmaceuticals, textiles, and more.
·
Incentives
provided on incremental production and sales by domestic manufacturers.
Impact:
·
India
became a major smartphone manufacturing hub.
·
Aligns
with the "Make in India" initiative to boost manufacturing and
generate employment.