India’s economy grew at the slowest pace in more than 6 years now at 5% in the June quarter of 2019-20. The economy has decelerated for the six consecutive quarters and India lost the ‘fastest growing economy’ tag to china with the Chinese economy growing around 6.2% despite the trade war happening with the U.S. GDP growth rate is coming down. GDP projected to grow by 6.98% in 2018-19. 26%, fall in average monthly job creation since October 2018 as per EPFO. There are four engines in the economy of which only two are working- public expenditure and consumption. Now as consumption itself has tanked we are only on one engine of the economy which is also slowing in the second half of the last fiscal. Private consumption expenditure decelerated to 18 quarter low at 3.17%. Investment demand picked up at 4% from 3.6% in the preceding March quarter. Both the financial services (5.9%)and public administrative services have decelerated in the June quarter.
The auto sector has seen a contraction in sales for the nine consecutive months till July. Car sales have sunken in the past three quarters, fuel consumption is down to the lowest in 7 quarters, per generation growth is the lowest at 5 years. Finished steel production is coming down. Industrial production index is at 21 month low. At an average of 2.9% in 2014-19, AGRI growth has been slower than UPA 2. NET national income has remained flat at 11.6 at 0.1%.
Average labour wages have seen a sharp drop. Sales and assets grew slowest in 5 years. 1 lakh crore fall in bank credit as per RBI in a fortnight of April 12. Power generation growth decelerated in 5 years at 3.56%.
The unorganized sector got hit badly when we had demonetization and then the GST. Therefore in a sense, there is the demand problem that is very important because 94% of the workforce is in the unorganized sector and if their income falls then the demand for agriculture falls and therefore the price of agriculture goes down. The terms of trade moved adversely against agriculture. Rural India is in terrible shape as farmers are not receiving adequate prices and rural income has declined. Our food prices have collapsed. Food inflation was less than 1% whereas nonfood inflation or core inflation was above 5%.
Among the service sector, only trade, hotels, communication segment has grown faster in the June quarter at 7.1%. The electricity sector has seen vigorous growth in demand with growing around 8.6% in the June quarter.
Modi government policies have resulted in massive jobless growth. More than 3.5 lakh jobs are lost in the automobile sector alone. The rupee has become Asia’s worst-performing currency. India has not been able to increase the exports to take advantage of opportunities that have arisen in global trade due to geopolitical realignments.
Government expenditure accounts for 10 percent in the economy. But sensing an economic slowdown they increased the expenditure by 19% in 2017-18 and 13% in 2018-19. This was the highest increase in government expenditure since the 2008 economic recession. And right now the government doesn’t have enough money to invest in the economy.
Now the question that comes here: Is India really spiraling downward in its economy from where it is difficult to revive? And will this economic sluggishness ultimately lead to a recession? And if it is the case how is the Modi government going to tackle it? Are they going to bring up policies that can recover our economy or in the long run it will only create more difficulties for the average people?