The Indian economy, that was considered to be the fastest growing major economy not long ago, saw a dismal performance in 2019. The real estate, automobile, construction sectors and overall consumption demand have been the worst hit. The economy is reportedly suffering because of a fall in domestic demand as well as demand in foreign markets.
A drastic fall in gross domestic product (GDP) growth rate at 4.5 percent was noted for the second quarter (July-September) of the current financial year (April 2019-March 2020). The Indian economy’s growth rates have been repeatedly cut by international bodies like the International Monetary Fund (IMF) and the World Bank.
A continued contraction in manufacturing activities, a slowdown in business investments, and reduced consumption demand domestically have jointly been held responsible for the fall in the GDP growth rate.
There are signs of “deep malaise” in the Indian economy, said Raghuram Rajan, the former Governor of India’s central bank, the Reserve Bank of India (RBI). “Growth is slowing significantly and there is currently little fiscal space available to the government to spend more. Corporate and household debt is rising and there is deep distress in parts of the financial sector. Unemployment seems to be growing,” he was quoted as saying by the India media.
“Repeated government allusions to the 5 trillion U.S. dollars economy by 2024, which would necessitate steady real growth of at least 8-9 percent per year starting now, seem ‘increasingly unrealistic’,” he added.
However in a most recent prediction, the Confederation of Indian Industry (CII) expressed hope on Monday that the Indian economy should recover gradually in 2020 and stage a turnaround from the slowdown. This, one of the top industry bodies of the country, would be prompted by fiscal and monetary measures along with an easing of global trade tensions.
“Nascent signs of recovery are noted in the form of improved PMIs of manufacturing & services, jump in passenger air traffic, sharp moderation in the decline in sales of passenger cars among others”, President of CII Vikram Kirloskar said.
“Though we may continue to see a subdued GDP print in the third quarter as well, but the quarters thereafter are likely to see a rebound,” he added.
The growth rates in recent quarters in the third largest economy of Asia have been the slowest in six years while the current banking credit growth is also at lower than 8 per cent which is a five-year low.
The CII statement said that the systemic clean-up of the financial sector will be something that 2019 will be remembered for by the industry. It said that such measures could have cause short term issues for the Indian economy. But there will be extensive positive ramifications for the economy in the short to medium term because of these measures announced and being implemented by the government.
“To paint an ideal scenario, the acquisition of land should be simplified, the tax regime should be made stable, wages should be determined in accordance with the productivity levels, and there should be lowest possible deterrents to timely completion of projects,” Vice President of CII T V Narendran said.
(Adapted from XinhuaNet.com)