2019 – Posted in: Daily News

INDIA’s GDP GROWTH SLIPS

For: Mains

Topics covered:

The economic slowdown, its reasons and consequences.

News Flash

India’s GDP growth in the first quarter of FY20 slowed to 5 percent- the lowest in 25 quarters or in six years. Key Indian sectors are facing the effects of the slowdown.

The slowdown could get worse

India’s GDP growth has touched 5 percent to a six-year low in the April-June quarter of 2019.
According to NSSO data, almost all Indian sectors including auto, manufacturing, agriculture, FMCG, real estate and construction have slumped badly.
The eight-core sectors have registered a negative growth of just 2.1 percent.
According to the Centre for Monitoring Indian Economy (CMIE), overall unemployment in India has now touched 8.2 percent, with urban figures as high as 9.4 percent.
Along with domestic investors, foreign investors are also constantly pulling out capital from the Indian market.
The Indian rupee has again become one of the worst-performing Asian currencies after depreciating 3.65 percent against the dollar in August.
China recorded GDP growth of 6.2 percent in the April-June quarter, way above India’s 5 percent.

$5 Trillion Economy

According to the EY’s Economic Watch, India will have to grow at 9 percent in each of the five subsequent years to become a USD five trillion economy.
USD 3.3 trillion in FY21, USD 3.6 trillion in FY22, USD 4.1 trillion in FY22, USD 4.5 trillion FY24 and USD 5 trillion in FY25.
For this, a massive flow of investment is required in all core sectors.

Reason for the economic slowdown

Demonetisation and GST implementation have been identified as major factors behind the slump in growth in many reports and surveys.
Medium and Small Scale Enterprises (MSMEs), the backbone of multiple Indian sectors, are still suffering from the combined consequences of both the reforms.

Way forward

In the ongoing slowdown, the government’s primary goal should be setting the basics right instead of going ahead with a “band-aid” patchwork.
It should first consult economic experts.
The government to focus on boosting investments, which could help in reviving consumer demand and increase the output of key sectors.

Source: India Today