Reasons for Economic Slowdown in India.

By Varsha J

Much has been written and said about the ongoing economic slowdown in the Indian Economy. What was being indirectly said about several economic indicators flashing warning signals for the last year or so, what has triggered the present criticism is the GDP (Gross Domestic Product) figures for the last quarter which came in at 5.7% and suddenly brought the issue into a full public glare.

Indeed, given the fact that India was touted as the Fastest Growing Developing Country for the last two years, the slowdown has also caught many of those making such claims by surprise.

The reasons for the current economic Slowdown are the collapse in private consumption and Investment freeze,The effect of Demonetization,Too much debt,Roll out of GST and also the global economic slowdown.

★Collapse in private consumption and Investment freeze: As a result of Demonetization consumers prefer to hoard money and keep it in the bank reducing the expenditure in consumption.Moreover demand has fallen in rural areas due to cash shortage

★The effect of Demonetization: We have a situation wherein cash has dried up leading to a slowdown in the economy.It is not only the private consumption but also the big corporates which are drowning in debts.There is also a freeze in investment by industries who are now downpaying their debts.

★Too much debt : Added to this is the fact that most Public Sector Banks are saddled with high NPAs that have resulted in them tightening lending and instead, seeking deposits and otherwise repairing their balance sheets by making provisions for Bad Loans.

★Rollout GST: It has hampered the small scale industries by forcing them to withhold inventory until they migrate to GST network.

★Global slowdown: It is not these factors alone, and the most important factor is that there is also a global economic slowdown that is happening and given the fact that India is a net commodity exporter, there has been a slump in the volumes of exports.

Lastly the slowdown is a part of structural shift wherein economy is shifting gears from high investment era to low investment era as well as transition to a cashless digital economy.