ECONOMIC SLOWDOWN

-by Aaisha Haries

This decade has witnessed one of India’s greatest economic slowdown. In the July-September quarter, the growth slipped to 4.5%, worsening the job prospects for millions of youth entering the workforce each year. The slowdown can only be reversed if both short-term and long-term reforms are undertaken. There was a sudden and dramatic fall in GDP growth. Till now, while only businesses were talking about the slowdown, it is now a reality for the country. People worry about how bad things are and is this bottom or the beginning of a slowdown. The speed and nature of the government and industry’s response are matters of debate and also whether these actions will turnaround things immediately, or not. And finding answers to these questions are of utmost importance because it affects the consumer consumption. It is not a sign of weakness and acceptance of any blame for acknowledging the problem. leadership in the corporate sector has failed to recognize the major transition taking place in their sector that has affected consumer demand. The Indian government along with its citizens are suffering. Even the government’s mismanagement is responsible for much of its slowdown, it has fallen victim to these blunders.

REASONS FOR THE ECONOMIC SLOWDOWN:

The main casualty: tax revenue. It is a trouble sign for India as taxation is a core part of the capabilities of any government, especially a greater worry for a poor country like India where state spending is key to lifting people out of poverty.

Tax to GDP: India has a long-standing problem of not collecting enough taxes given the size of its gross domestic product. Not only is it much lower than developed countries with comparable GDP sizes, it is below even comparable developing countries. India’s tax-to-GDP ration lags behind even Nepal.

Demonisation: Demonetisation can be said to have contributed too much of the slowdown and supply bottlenecks mean that there is a broad slowdown across the entire value chain of the demand and supply dynamics. What we have is the situation wherein cash has dried up leading to a slowdown in economy. The big corporates are as much to blame since they’re drowning in debt that they accumulated during the boom years of first decade of the 21st century.

Debt issues: Most public sector banks are saddled with high NPA or non performing assets that have resulted in them tightening and lending and instead seeking deposits and otherwise repairing their balance sheets by making provisions for bad loans. One might very well see a vicious cycle wherein bad debts and demand collapse lead to no lending and no fresh investments in addition to any concepts.

Goods and service tax(GST): GST on a nation wide basis has lead to the slowdown cannot be denied. GST has hampered small businesses more than demonetisation by forcing them to withhold inventory until they migrate to the GSTN or the GST network and become company for the numerous rules and regulations that are part of this tax.