India’s real estate, automobile, construction sectors and overall consumption demand witnessed a sharp and constant decline as the economy faced a slowdown in 2019.
In the first quarter of 2019, India GDP grew by 5.8 per cent, marking the slowest growth since the fourth quarter of FY13
The second quarter experienced a drastic fall in the GDP growth rate to 4.5 per cent. It is likely to slow down further to 4.3 per cent in the third quarter of 2019-20 as compared to the second quarter, Singapore’s DBS Bank estimated.
India’s growth rate has been slipping for five quarters now.
Several international bodies like the International Monetary Fund (IMF) and the World Bank constantly slashed their growth estimates for the Indian economy, recording the lowest GDP growth rate in 26 quarters or six years.
A fall in consumption, lack of private investments and sluggish exports are being blamed for sluggish GDP growth.
Impact On All Sectors
The year 2019 was one of the worst for the automobile industry after passenger vehicle sales declined by 17.98 per cent in April-November 2019 over the same period last year, according to the Society of Indian Automobile Manufacturers (SIAM).
India’s unemployment rate rose to 8.5 per cent in October from 7.2 per cent in September 2019. The last time India witnessed such a massive unemployment rate was way back in August 2016, at 9.59 per cent. Another assessment claims that India has lost nine million jobs until 2018.
India’s top consumer goods companies reported a drop in sales all through this year.
India’s state-run banks to have been struggling with non-performing assets.
India’s industrial output contracted to 3.8 per cent in October for the first time. The fall is attributed to poor performance by power, mining and manufacturing sectors. Seventeen of the 23 industry groups in the manufacturing sector recorded negative growth in September 2019.
Food Inflation in India jumped to a 71 year high, increasing the wholesale price inflation (WPI) to 0.58% in November after decelerating for several months, as vegetable prices including onions picked up.
Despite strong measures by the government for affordable housing, the country’s real estate sector witnessed a massive loss combating poor housing demand. There remains an unsold inventory of 450,000 housing units at present.
Former Governor of Reserve Bank of India (RBI), Raghuram Rajan said that there are signs of “deep malaise” in the Indian economy.
Prescriptions To Ailing Economy
As a prescription to the slowing economy, Finance Minister Nirmala Sitharama recommended several steps to reverse the downturn, but none of them seems to change the situation as the GDP growth for the September quarter slumped to a six-year low of about 4.5 per cent.
Observing the trend, the International Monetary Fund (IMF) is all set to cut the growth estimate for India “significantly”, said IMF’s chief economist Gita Gopinath.
IMF also suggested the government to avoid a fiscal stimulus to boost the ailing economy and instead go for easier monetary policy. In a consultation report on the Indian economy, the IMF said that considering the cyclical weakness of the economy, the monetary policy should maintain an easing bias, at least until the projected recovery takes hold.
The IMF report also suggested that personal income tax collections could be increased by ending exemptions, reducing the minimum threshold for taxpayers and by raising contributions by top earners.
Accepting that the Indian economy was facing “some challenges” due to the decline in growth this fiscal year, Vice-President of India Venkaiah Naidu said that the country had faced similar speed breakers in the past but had “bounced back with a higher growth rate every time.”
Referring to the reforms, including the Goods and Services Tax (GST), “One Nation, One Tax, One Market,” and the steps taken to control the flow of black money, the vice president asserted that they were committed to making the economy “more robust and resilient.”
The government has also taken measures to tackle the problem of Non-Performing Assets and improve the health of the banking sector, he added.
Finance Minister Nirmala Sitharaman told the Rajya Sabha on November 27 that growth may have slowed down but the economy will never slip into recession. “If you look at the economy with a discerning eye, you see that growth may have come down… but it is not a recession yet and won’t be a recession ever,” Sitharaman said.