Mahesh Chander Sudan
We, the people of India, may encounter disturbing figures with respect to Gross Domestic Product (GDP) growth for the second quarter of financial year 2019-20. Recent surveys published by State Bank of India indicate further slippage of GDP growth to 4.2 percent. An SBI research report also modified GDP growth rate for current financial year from earlier projection of 6.1 to 5 percent. This downward trend of GDP growth rate slippage is also felt by HDFC and Moody, however the official data for the second quarter will reportedly be released on 29 Nov and the full year estimate will be available in January next year. It is seen that most of these agencies feel that our GDP growth may remain below five percent for second quarter and the annual figure may touch five percent. Moreso, the SBI has been joined by other global agencies like the Asian Development Bank (ADB), World Bank, Organization for Economic Cooperation and Development (OCED), Reserve Bank of India (RBI) and International Monetary Fund (IMF) in downgrading growth rate for financial year 2019-20 for our country. It is seen that various indicators have been studied across while formulating data including excess rainfall affecting kharif crops across agrarian India.
As regards forecasted slow down for second quarter of current financial year, it is felt that low automobile sales, lowered air traffic movement, flattening of core sector growth and declining investment in construction and infrastructure have primarily hit GDP growth. It is expected that RBI may adopt larger rate cuts during their monetary policy review in December to soften the capital investment avenue for industrialists/entrepreneurs. The Government of India have initiated few corrective steps post official declaration of growth rate for first quarter of the current financial year to contain economic slowdown basically to enhance the liquidity in the market through banks and by cutting down corporate tax. It may be seen that these corrective steps could not arrest the slow down as expected. Market in general is suffering from diminishing demands and in turn it discouraged further investment thereby allowing vicious circle to complete that resulted in production units functioning well below their capacity to produce/manufacture. Advance Indicators therefore show weak consumption and investment, prompting glooming estimates. There are few other parameters like electricity demand, diesel consumption and retail car sales in the month of October that does not suggest any positive change. The revival will therefore be gradual and no upward trend is expected in the near future. Bankers are worried for low credit offtake. For an instance, SBI lowered rates and widened tenure to boost up the credit demand. Prolonged economic slowdown compelled Moody’s Investors Service to lower its rating outlook to negative. It may be appreciated that lack of demand in the market prevails due to shrinking purchasing power of the consumers. The present slowdown of the economy is demand driven and needs to be corrected by enhancing the purchasing power of the consumers through inclusive approach by allowing more liquidity in the hands of rural and urban middle class people that may prove instrumental in creating demand at large. No doubt, our Finance Minister announced cut in the corporate tax and also injected remedial cash boost up dose to correct the path of liquidity with banks, but it is yet to show progressive change in the system. There is hardly any sector of the economy which displayed immunity from ongoing economic slowdown.
It is also pertinent to mention that a sense of fear affecting investor sentiment prevails in the market that creates deepening pessimism about Indian Economy. We therefore expect professional intervention of the government of India to arrest the ongoing economic slowdown by ensuring availability of funds with affected class of citizens either by lowering the rate of direct and indirect taxes or by boosting rural economy through Government social schemes that may contain ongoing economic slowdown for revival of our economy at the earliest.
(The author is Wg Cdr (Retd)
feedbackexcelsior@gmail.com
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