India Inc growth story

By Nagaland Post | Publish Date: 12/11/2019 1:10:12 PM IST

 India’s GDP growth rate slowed down to 4.5 per cent in the July-September quarter of this fiscal, data by the National Statistical Office released showed. The decline in economic growth came on the back of dwindling consumer demand, slowing private investment and global slowdown. India’s economic growth slowed to a 6-year low of 4.5 per cent in the July-September quarter. With inflation rising, fears of stagflation- a fall in aggregate demand accompanied by rising inflation-have resurfaced. The Reserve Bank of India also reduced its GDP forecast for the financial year 2020 to 5 per cent from 6.1 per cent earlier. The RBI’s high-powered Monetary Policy Committee (MPC) accepted that economic growth had weakened further and output gap remains “negative”. Since February this year, the RBI has revised its GDP growth projections for the financial year 2020 from 7.4 per cent in February to 5 per cent now, which is sharpest such revision in the recent years. However, former finance minister P. Chidambaram maintained that the figure could dip even as little as 4.5% by 2020. Former Reserve Bank of India (RBI) governor Raghuram Rajan said India is in the midst of a “growth recession” with signs of deep malaise in the Indian economy that is being run through extreme centralisation of power in Prime Minister’s Office and powerless ministers. Rajan said that previous governments may have been untidy coalitions but they consistently took path of further economic liberalisation. He identified extreme centralisation, coupled with the absence of empowered ministers and the lack of a coherent guiding vision, as retarding force where reform efforts only pick up steam only when the PMO focuses on them but lose impetus when its attention switches to other pressing issues. The former RBI governor drew attention on Modi’s electoral slogan “minimum government and maximum governance. He said the slogan was often misunderstood as what was meant was that the government would do things more efficiently, not that people and the private sector would be freed to do more. He said construction, real estate and infrastructure sectors are in “deep trouble” and so are lenders to it like the non-bank finance companies. The crisis among shadow lenders and a build-up of bad loans at banks have curbed lending in the economy. Unemployment, especially amongst youth, seems to be growing, as is the accompanying risk of youth unrest. Rajan also maintained that the repeated government allusions to a USD 5-trillion-economy by 2024, which would necessitate steady real growth of at least 8-9 per cent per year starting September-December seems increasingly unrealistic. Notably, India’s $57 billion automotive component industry, which accounts for 2.3 per cent of country’s GDP and employs over 5 million people, has witnessed its worst-ever half-yearly performance with overall revenues registering a de-growth of 10.1 per cent at Rs 1.79 lakh crore in 2019-20. This has resulted in around 100,000 people losing their jobs and an estimated investment loss of about $2 billion that would have happened had the industry continued to grow. The State Bank of India(SBI) has said , the second quarter GDP growth may further lower down to 4.2 per cent on low automobile sales, deceleration in air traffic movements, flattening of core sector growth and declining investment in construction and infrastructure, and put the growth forecast for FY20 down to 5 per cent from 6.1 per cent earlier.

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