Economic Slowdown 2020.

After the recession in 2008, the Indian Economy is again at downturn now. Well, the condition of Global Economy is also not different. IMF warned the world economy is increasingly vulnerable to impact of climate emergency. India being a developing market economy, the condition in global economy is definitely affecting it and the contraction of economy is supposed to be a rarity.

The latest annual report 2018-19 by RBI, confirmed that the Indian Economy hit a rough patch. GDP growth rate of the economy slipped to 5% in the first quarters of Financial year 20, which is the lowest in six years. Well, since the past decade this is the third time, economy is being close to a situation of recession.

India was the fastest growing major economy till last year. But now Phillipines and Indonesia grew at a faster rate than India, followed by Malaysia just behind it. IMF downgrade India’s growth rates. World Bank estimated India’s growth to be 5%, while UN estimated to be 5.7%. IMF suggested some indications for Global Growth decline. Those include the geopolitical tension between US and Iran, further worsening of relations between US and it’s trading partners and all. 


Slowdown of economy’s concern and perception affect consumer confidence and consumption. Some of the main reasons of the slowdown are given here.

1. Recent sharp fall in PFCE.  Private Financial Consumption Expenditure  (PFCE) in June quarter, increased to 3.1% compared to 7.2% in March quarter. Any fall in consumption expenditure would only escalate the situation of the crisis even more. This occurs because when consumption falls, the output and employment falls eventually leading to a more devasted situation to the crisis. The fall in PFCE reflect in lower household demand.
2. Slackening of investment Since the 1991 economic reform introduced by Manmohan Singh, investment perform a great role in the GDP. The investment’s contribution to growth fell by 6.2% during 2014-19, which is less than 2011-14.  The slackening of investment leads to lowering the level of infrastructure development. This can seriously damage the small business by causing hesitation for their emergence. The investment slackening forces the entrepreneurs from investing in Research and Development. 
3. US – China Trade war.   Trade war is  defines as an economic war between countries to impose extreme foreign policies So as to gain more control over their own economy. US and China, the two largest economies are in a race to become the superior economic power. They hold 24.3 and 15% economy of the world respectively. Out of the $3.1 trillion/year of US import, $540 billion worth of import is from China alone. other hand it’s export are only $2.5 trillion/year. To be more clear, China is growing on par with US and most of it’s growth can be pegged on the trade with the US.
4. Lack of saving one of the other problem faced by the economy of India is the lack of saving. The current youth generation is not interested about creating savings. The lack of saving create an issue for lack of money for investment too.
5. The high rate of GST, liquidity in NBFC and shift in behavioral pattern of workforce.  The domestic demand has slowed more sharply than expected amid stress in Non-Bank Financial Sector and decline in credit growth.