Indian Economy has lately sent highly worrying signals across the spectrum spurred by a significant fall in the domestic demand and decline in consumption. The numbers which had been looking good have seemed to have taken a sharp U-turn and capped the overconfidence in New Delhi by some grim realities facing the present condition of Indian Economy.
With just a few months into the second innings of Modi government, the Reserve Bank of India, the International Monetary Fund, and many other rating agencies have significantly slashed their projections about the 2019 growth story.
Present Condition of Indian Economy
The near term outlook for the Indian economy is worrying. The government which was also riding the bandwagon of achievements has woken from slumber with the latest round of measures announced by Finance Minister Sitharaman. These are seen to be insufficient by many looking at the scale of the problem.
The annual growth recorded in the April-June quarter of 5.0 percent was seen as the lowest one observed in the last six years and has been the result of a weakening of consumer demand and drying of other private investments.
The figures represent what the current situation is not merely the result of cyclical issues and policymakers will have to take serious cognizance and plug in the structural gaps for ensuring secular and inclusive growth. This is also a signal that the economy has not completely recovered from the shocks of demonetization and GST.
The slump in domestic demand has begun to surface, which has led to a dismal figure of consumption growth, putting it at 18-month low and a nominal GDP showing up at a 15 year low.
The tax revenues show glaring gaps and even the investor sentiment has taken a severe hit. This only point towards worrying trends to be seen in the Indian Economic Outlook going forward.
Indian Economic Outlook
Moody’s has projected a slowing forecast for the economy by paring it down by 60 basis points. The international firm has cut the Indian GDP growth forecast to a figure of 6.2 percent owing to the moderate business sentiment and also the slow flow of credit, weak hiring, job-less growth, financial worries in the rural household sector and apparent stress on the non-banking financial institutions.
RBI, on the other hand, has given better figures and has stated its estimates around 6.9% for 2019-20, looking downwards from its June forecast of 7 percent pointing to the fact that the domestic economy remains weak amid a global slowdown and deepening trade tensions.
Many indicators have also pointed at a sharp decline only. A major drag has been played by the automobile sector, which forms a primary part of the manufacturing sector.
The recent stimulus measures announced by the government are broadly inadequate to put the economy back on track. The government should also consider working on the sops for specific sectors and even smooth GST refund.
Even the agriculture sector needs to be revamped. Almost all the productive sectors have slowed down apart from mining and power generation.
Indian economic prediction is largely grim, and the government has to adopt a more broad approach to address the structural gaps and not merely plugging in the economy by monetary stimulus.
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The GaneshaSpeaks.com Team