Indian Economy is a developing mixed economy. It is the world’s sixth-largest economy by GDP. In the financial year, 2015 India’s economy became the world’s fastest-growing economy by surpassing China. The economy of India has long-term growth prospects due to its high young population, low dependency rates, healthy savings, and investment rates. India has become a major exporter of IT services, Business Process Outsourcing (BPO) services, and software services. This is the fastest-growing part of the economy. It is also the largest private-sector employer in India. India has one of the fastest-growing service sectors in the world.
The agricultural sector is the major employer but its share in the GDP of the country is declining year by year. India also ranks second worldwide after China in farm output. Although the industrial sector has a steady share in the GDP. India is the fifth-largest automobile manufacturer in the world with an annual production of 44 million automobiles in 2016.
Despite having such wide-scale production in almost every sector the GDP of the Indian Economy estimated to be around 5.7 % due to the demonetization on the 8th of November in 2016 and the introduction of Goods and Service Tax (GST) on 29th march of 2017. Under which the notes of rupees 500 and 1000 were deprived of its status as an Indian currency where under GST tax will be levied on. There was a negative impact on the GDP of the country due to it, which led to a decline in the GDP and a fall in the value of the currency. Though this negative impact was a temporary phenomenon. It would definitely bring permanent and substantial benefits. While GST is a new system that the Indian Economy will gradually adjust.
Benefits of Demonetization on the economy:
- A major accomplishment of the demonetization has been that it has helped the government in tracking black money and the number of tax evaders in the country.
- Another big benefit was a rapid expansion in the tax base which will eventually give rise to the GDP of the country.
- Another aim was to eliminate counterfeit notes that have been in circulation affecting our economy.
- It gave a boost to the non-cash payments and bring back the cash to GDP ratio in double digits which is good for our economy.
Benefits of GST on the economy:
- It helped in the removal of indirect taxes such as VAT, CST, SAD, service tax and Excise.
- The major benefit was the reduction of manufacturing costs due to the lower burden of taxes on the manufacturing sector. It resulted in falling of prices of consumer goods.
- Increase in demand will eventually lead to an increase in supply giving a much-needed boost to our economy.
So, both Demonetization and GST are a noteworthy step taken by the government that promises to provide sustainable growth in the Indian Economy.