Over the past few weeks, Finance Minister Nirmala Sitharaman announced several measures to tackle economic slowdown. These steps have come after India's GDP growth in the first quarter of Financial Year 2020 slowed to 5% the lowest in 25 quarters or in six years.
However, key Indian sectors are facing a slowdown that seems far more than a cyclical occurrence, said many economists including former Indian prime minister Manmohan Singh, who is also one of India's most prominent economists.
Singh said on Sunday in a video address that it is necessary for the government to reach out to all "sane voices" to steer the economy out of this crisis. Commenting on Singh's statement, Nirmala Sitharaman said, "I have no thoughts on what he said. He said it and I listened to it."
The government and finance minister Sitharaman--even though there are enough alarming signs on growth slowdown--are yet to admit that the Indian economy is going through an upsetting period.
At a press conference on August 30, a reporter asked Sitharaman to explain how the finance ministry plans to tackle the multi-sector crisis, especially the automobile sector. There was no clear response.
On September 1, at another press conference in Chennai, the finance minister's reply was no different.
When reporters asked whether there is an economic slowdown, the finance minister said the government is holding consultations with ailing sectors and refused to admit that the country is going through an economic crisis.
SLOWDOWN COULD GET WORSE
Well, it could be too late for the government to even admit that India is suffering the worst economic slowdown in a decade--the coordinates of a slowing economy have become so prominent that even laymen, with little knowledge of economic jargons, have started identifying the crisis as job losses continue to mount across most sectors.
Let's begin by disseminating official data that has painted a grim picture over the past few weeks:
1) India's GDP growth has touched 5% to a six-year low in the April-June quarter. The alarm bells were ringing prominently when growth had slowed to 5.8 per cent in the previous quarter, but a carnival of political issues overshadowed economic slowdown. While in nominal terms, India's gross domestic product (GDP) grew by 7.99 per cent, which is the lowest since December 2002.
2) Almost all Indian sectors including auto manufacturing, agriculture, FMCG, real estate and constuction have slupped badly and official data released by the National Statistics Office (NSO) confirm that. Weaker consumer demand and slowing private investments are the two key factors behind the ordeal of core Indian sectors, many of which have openly come out openly with S.O.S signals. Meanwhile, eight core sectors have registered negative growth of just 2.1 per cent in July, compared to 7.3 per cent in the corresponding month a year ago. All of these indicators also explain the reason behind the recent jump in job losses. According to the Centre for Monitoring Indian Economy (CMIE), overall unemployment in India has now touched 8.2 per cent, with urban figure as high as 9.4 per cent.
3) Indian investors have also become wary of the slowing economic growth as major companies, especially from the auto sector, have been posting huge dips in profit and even losses in many cases. Not just domestic investors but foreign investors are also constantly pulling out capital from the Indian market. FPIs have pulled out a net amount of Rs 5,920 crore in August even after the government announced a rollback of enhanced surcharge on FPIs.
4) All major Indian companies--from biscuits to vehicle manufacturers--have seen their fortunes dip over the last few quarters, forcing them to eventually call out to the government for support. The lending crunch in the market has deeply impacted almost all sectors that play a leading role in driving the Indian economy.
5) Meanwhile, the Indian rupees has again become one of the worst performing Asian currencies after depreciating 3.65 per cent against the dollar in August. This, too, is the steepest decline in the Indian currency in the last six years. The value of the rupee has hit Rs 71.98 against the dollar at present. According to global brokerage firm Nomura, weakness of the rupee is a reflection of the under performance of high-yielding emerging markets foreign exchange, weakness in equities and recent policy actions.
These are just a few points that represent the situation of the Indian economy at the moment. It could become much worse if healing measures are not introduced quickly to mitigate the effects of a looming global economic crisis. The economic crisis may hit prominent economies around the world starting with the US as early as 2020, according to a surveys of top US Economists conducted by the National Association for Business Economics (NABE).
In the April-to-June quarter, Asia’s third-largest economy grew 5% year-over-year- a six year low pace. That prompted several economists to warn that the country’s growth rate could fall below 6% this year.
