Mir Muhammad Nayyar Azam
Indian economy decelerated strongly to a six-year low in the most recent quaurter, heightening concerns about the challenges facing one of the world’s largest economies.
Until this year, India was considered the world’s swift growing sizable economy. But growth has slowed enormously as consumers spend less and appeal for exports decreases i.e. fall in the aggregate demand.
The latest GDP figure was “definitely much lower than what we expected,” said Dharmakirti Joshi, chief economist. Worth worrying was the weak enterprise in the manufacturing sector and the slowdown in private consumption, which he described as the “bulwark of the Indian economy.”
The state of the economy has emerged as the biggest challenge for India.
India needs its economy to expand for an uninterrupted period of time if it has to get rid of poverty and bring about jobs for the millions of unemployed young people.
The unemployment rate rose to a 45-year high in 2018.
At the current growth rates, prime minister’s 5 trillion economy dream seems impossible.
The GOI Recently designed a committee aimed to find ways to push the economy and create jobs, easing restrictions on foreign investment to attract funds.
The slowdown in GDP growth came as a “surprise,” for K.V. Subramanian, India’s chief economic adviser.
In the prior quarter, the economy had expanded by 5.8 percent.
It is not clear how the economy will make a speedy return to its prior health..
“I don’t see how this is going to turn around” in the near term, said Santosh Mehrotra, a labor economist.
Former Finance Minister P. Chidambram when asked to rate budget out of ten.
He replied “10 has two digits , one and zero..you can pick either”
When asked what would you suggest for present finance minister .
He replied “she should resign”.
“The India that we know and cherish is slipping away fast. Willfully stoked communal tensions, gross economic mismanagement and an external health shock are threatening to derail India’s progress and standing,” former Prime Minister Manmohan Singh wrote.
Is there a way to accelerate recovery?
Former chief economic adviser to the government, Arvind Virmani, says the economy likely bottomed out in September .
“So I expect Q3 growth to be higher than Q2. The issue now is what the government can do to accelerate growth recovery and reduce the time the economy takes to return to the 7.5% growth track,” he says.
“Besides monetary easing by the Reserve Bank of India (RBI), the government must simplify the goods and services tax (GST) and introduce a new tax code to clear the tax jungle created by our ancient income-tax law ,” Virmani added.
Former Statistician of India, Pronab Sen, disagrees with the FM’s recent packages having focused too much on the supply side, wondering if these measures would propel a quicker recovery.
“The FM’s measures don’t address the problem of demand contraction. I don’t see a recovery out of those,” he says, adding that the economy would recover in two or three quarters only if the government shifts its attention from large highway projects to smaller core sector activities that have a faster turnaround time.
- Author is pursuing M.sc in economics at SMVDU, Katra. He can be reached at: [email protected]
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