ECONOMIC SLOWDOWN

By Cindrella Stanly

India’s economic growth hit a six-year low of 5 per cent in the first quarter of the current fiscal. Finance Commission Chairman N K Singh said the current economic slowdown is episodic and expressed hope that sluggishness will not continue for long. The disruption in industries is not cyclical or because of economic slowdown. There is a structural shift in many industries because of technology or shift in consumer preferences. Automation is affecting jobs in both manufacturing and services, which displacement is also affecting the consumption cycleLow wages and income inequality have led to a fall in demand. This situation cannot give rise to sustainable economic grow.in my opinion,Also, high rates of GST, liquidity crisis in NBFCs, and shift in the behavioural pattern of the workforce due to the entry of young people has discouraged savings.

The Effect of Demonetization

Indeed, Demonetization can be said to have contributed too much of the slowdown as the Double Whammy of demand collapsing, and supply bottlenecks mean that there is a broad slowdown across the entire value chain of the demand and supply dynamics.

Thus, what we have is a situation wherein cash has dried up leading to a slowdown in the economy.

One must also take note of the fact that it is not only private consumption and small enterprises causing the slowdown.

Too Much Debt

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

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.

Apart from that, the global slowdown has also been accompanied by a retreat of globalization which has resulted in FDI or Foreign Direct Investment being only in the areas of speculative finance and distressed assets purchases rather than into investments that help the Real Economy.

Thus, it can be said that ongoing global headwinds also have contributed to the slowdown

The Indian economy has huge potential, the current slowdown must be dealt with a bottom-up strategy, which may include boosting agriculture, food processing, tourism, MSME, automobiles and pharmaceuticals.