Earlier, when the GDP prospects for FYQ1 2019-2020 were released, people, especially economists were taken aback by the slow growth rate of the country’s GDP. The GDP slumped to 5% from 5.8% recorded in the previous year’s. Though anticipations were high for a nominal growth rate, the results were devastating. The underrated GDP numbers prove to be disengaging for the manufacturing, auto, and real estate sectors.
The contribution of the manufacturing sector to the economy was about 16% last year and stooped to a 0.6% decrease. Car sales have hit rock bottom, the highest in 20 years. This means that both, demand in consumption and investment, have been dormant.
Consumption accounts for more than 60% of the economy. A drop in demand for consumption has adversely affected the economy. Everyday essentials from biscuits to clothing has seen a decline in demand. The shrinkage of the agriculture sector has caused a lot of hardship. The agriculture-based economy, which caters to the needs of 70% of the people saw a huge drop in growth to 2% compared to 5% in the previous year. It was also a rough patch for the construction field, as it saw growth fall to 5.7% from 9.6%.
Hear what experts have got to say about the condition of the national economy:
“The RBI is likely to deliver another 40 bps in rate cuts this year. While this will address the cyclical part of the current slowdown, the structural issues could continue to plague the system this year,” said Siddhartha Sanyal, Chief Economist, Bandhan Bank, Kolkata.
“There definitely is room for a further rate cut. Prior to the data release, we were expecting another 40bp rate cut by the RBI,” said Kunal Kundu, India Economist, Societe Generale, Bangalore.
“We do not see much immediate momentum in the growth picture. Near-term growth dynamics are unlikely to change dramatically,” said Madhavi Arora, Lead Economist, Edelweiss Securities, Mumbai.
“National accounts data is consistent with the picture suggested by leading indicators for Q1, FY20. GDP growth has decelerated to 5 %, the lowest since Q4, FY13. There is an acute slowdown in the manufacturing and agriculture sectors on the back of a slowdown in aggregate demand – both consumption and investment demand,” said Rupa Rege Nitsure, Group Chief Economist L&T Financial Holdings, Mumbai.
The economic future remains uncertain as I feel fruitless economic policies were adopted without monitored consent. A result of this is what the common man faces in the form of unemployment and threat in the consumption pattern.
If efficient economic policies are adopted, with expected outcomes, then the bitterness can be riped back to the economic fruitfulness that we seek.
Now every detail above proves that this ‘economic pandemonium’ won’t deliver a 5$ trillion economy, but will dispel the status and aspiration of becoming “the next big player” of the world’s economy.