The world economy is gripped in economic slowdown for sometime now. The upbeat economic performance in the last decade of the past country and about first four or five years of the present century has mellowed down from 2008-09 almost throughout the world including the developed countries. In fact economic slowdown in some of the advanced countries caused a similar situation in other countries of the world because of close linkages due to globalization. Even though Indian economy remained insulated against financial meltdown in America, European countries and Japan because of its strong vitals and large market but for some years now, particularly after demonitisation in 2016, it has also been witnessing economic slowdown in a perceptible manner. Even though it may not be a cause of any serious trouble but it can’t be ignored either. The economy has started feeling its pressure and before it causes any serious unrest in the country it will have to be addressed urgently and seriously.
The severity of world economic situation in 2008-09, compelled IMF to forecast a global recession with negative growth for world GDP in 2009-10. The WTO similarly predicted a noticeable decline in world trade in 2009-10. In 2008 itself, the exports of Germany, Japan and China declined substantially. Even when OECD countries provided some back up the situation did not look any better. The slow recovery of Japan and US economics further presented a bleak scenario for the growth of world exports. This slowdown in world exports caused large scale unemployment and social stress in the economies banking on large scale exports. This decline in exports did not spare India and her exports also declined to major world markets. In particular Gems and Jewellery and Textiles exports were severely hit resulting into the job loss of thousands of Indian workers. The impact continues since 2008-09 and downturn of GDP is witnessed as a result of this phenomenon. There has been considerable out flow of investments from India and it has severely impacted the economic health of the country limiting its productive capacity and ability to generate more employment.
Current Indian Economic Scenario
After taking a hit from world economic slowdown, the Govt. of India did adopt the policy of strengthening rural development and other demand augmenting measures, which did raise the demand and kept recessionary trend in check but it didn’t help much because some important sectors like Automobile, Real Estate, FMCG Manufacturing and Agriculture lagged behind and held back the growth rate from rising to the desired level. This lagging growth rate trimmed the jobs further. This does not augur well for an economy aiming at achieving the target of USD five trillion in next few years. The GDP growth rate of around five percent is lowest during the last six years and perhaps far lower than that achieved in 2001-02 which revolved around 8. In the Automobile industry alone, it is estimated that about 3 lakh jobs have been lost due to its slow down. On the whole weaker consumer demand and falling private investments are considered as the key failures leading to economic slow down in the Indian economy. Although by known standards it can’t be said that Indian economy is in recession as the GDP growth rate is positive and around five percent but it can surely be inferred that the economic slow down has set in and necessary policy corrections are required to be made to arrest further decline in the growth rate.
Primarily, the economic slow down was caused by demonitisation, GST and agricultural failures. It can’t be denied that because of rural character and relative slow response to degitisation, the country is dependent, in some significant measure, on cash economy and since the measures taken by the government resulted into cach crunch, it did contract rural business and economic activities in the non formal sector, throwing a large number of people out of jobs and as a consequence, witnessed sharp fall in demand. The production, as a result had also to be cut and this set in a vicious circle in the economy. Even though India may have improved its “ease of doing business” index but the business itself did not expand because of outflow of investment on the one hand and cash crunch on the other hand. Business is still grappling with GST and it is yet to convince the trade and industry of its usefulness. In fact it still is treated as harsh and unmanageable. Agriculture reforms are long awaited. The economic slow down will stay for some more time, even though there should be no pessimism that things will not improve. The resilience as also the intrinsic strength of Indian economy will ensure a turn around if government takes necessary steps to facilitate the large scale investment by reducing the interest rates and easing the tax regimes.
The experts have been analysing the economic slowdown and suggest that it will be overcome, if the government takes the reformative measures. They suggest the following (i) the government expenditure should go up to spur the investment and boost the demand (ii) the export incentives should be provided to augment the exports capable of facilitating the inflow of foreign exchange. (iii) To enhance the spending on rural welfare schemes to boost demand in the local markets which will give spurt to production in both formal and non formal sectors. The demonitisation and GST has resulted into an uncertainty in Indian business and the Private sector has been shying away from making investments in new ventures. There should be no new moves of the type of demonitisation and GST in the near future to create certainity in business which will ensure stability in Private sector investments. It is expected that government will take the required steps to break the vicious circle of economic slow down and put the economy on high and stable growth trajectory.
J&K economy slow down The J&K economy has not remained unscathed of economic slow down. In fact any regional economy can’t remain untouched from what is happening at the national level. However, in the case of J&K economy, there have been some local factors as well. The abnormal business conditions in the valley and unstoppable border conflicts in Jammu have very seriously effected the economy of the state. While as Kashmir suffered from some weather shocks as well, Jammu’s rural economy has been adversely effected by the cross border firing resulting into displacement of people from border areas leaving behind their farm and animal husbandry activities which are their mainstay occupations. Thousands of people have lost their livelihood. Not only this, their small business activities also come to a stand still resulting into severe hardships to these people. Since Jammu has a very large border with the neighbouring country,border conflicts hit the economic interests of Jammu very heavily. The small business activities in Jammu have also been severely hit by demonitisation and GST. In the recent months, the communication bottlenecks have also effected both the regions of J&K which have harshly operated on the UT economy. Kashmir handicrafts and orchards’ have also suffered losses and thousands of people have lost their jobs. The government needs to give due attention to the economic concerns of the two regions to arrest any further economic hardships.
(The author is former Dean Academics Affairs, Jammu University)