The GDP growth of Q4 has touched a sub6 value for the first time in the past couple of years. The financial year 2018-19 saw a steady decline in the economic growth which now has come to 5.8 per cent. One of the reasons is said to be a low domestic consumption which actually is the outcome of low purchasing power.
If we retrospect, we shall see that GDP started falling a year after the demonetisation. Whatever benefits were loudly claimed, none of them was actually achieved. It led to a decline in the Wholesale Price Index (WPI) of perishables such as fruits and vegetables. Deflation coupled with a crisis in employment resulted in a drastic reduction in the overall consumption.
Modi 2.0 has already projected a number of economic reforms, that are supposed to boost economic growth. As told by Rajiv Kumar, vice chairman of the Niti Ayog, the reforms would focus on changes in the labour laws, enhanced privatisation and creation of land banks for new industrial development.
Sounds promising? That time would tell! For now, it is clear that the government is going to take some bold moves towards the privatisation of major sectors. It is being speculated that more foreign investment will be encouraged. This definitely to some extent will pump money into the economy, however, the fact of employment generation still remains questionable. If changes in labour laws are going to be implemented then it wouldn’t be fair to look at it only from the investor’s point of view; the interest and rights of workers should also remain protected at the same time.
Rajiv Kumar clearly says that the government is planning to completely privatise or close down 42 state-owned firms. And the rights would be passed to an autonomous holding company that would control all the state-owned firms, without being liable to answer the government on decisions and policy making. The first industry in this process is likely to be the banking sector.
Well, wasn’t this already anticipated? Wouldn’t more people lose jobs in this process? How will this affect inflation and the stock market?
Right now we all are going to have a tough time in the wake of the sluggish growth of the economy, however, it is yet to be seen to what extent the global market is going to have an effect on the domestic economic growth.