Heading up to a small shopkeeper in a district in Uttar Pradesh, when asked about sales, he sighs and laments in grief and states that as far as his eyes can see the road, there are no customers.
“I have been working on and regularly speaking on measures we have been taking in matters of economy,”
These were the mouth shutting replies given by our finance minister Nirmala Sitharaman when condemned by politicians and public on matters of the economic slump in our country. No matter how bold one could be in this grave issue which not only is affecting our country’s development but also posing a huge threat to the lower middle classes which form a huge chunk of our Indian population.
Though Subramaniam’s mocking statement about 5% to the media provides comic relief but the situation of our economy is not as stable as it’s being made to seem. Reports claim that the GDP growth rate of the economy has slipped to 5% in the first quarter of FY20, the lowest in over six years.
This is an indication of tougher times ahead. Be it the recent collapse of the automobile sector or the rising number of non-performing assets (NPAs), sluggish consumer demand or failing manufacturing sector; all have a hand in this deceleration of growth rate.
Any fall in consumption expenditure, as and when it happens, would escalate the crisis even more. If consumption spending falls, then output and employment levels also fall since consumption expenditure directly impacts the other two. As a consequence, the economy would stagnate, and prices deflate.
Lower prices, if unable to recover the costs, would halt the operations of any firm and would initiate the layoff process. This, in turn, reduces earnings further. Hence, this vicious cycle keeps on repeating itself until the economy slips into a deeper state of shock.
One of the major blows which has added insult to the defeat of our present government is the enormous slump in our automobile and aviation sector. According to an article in the Business Standard, muted household spending as reflected in metrics such as falling car sales have resulted in a pile up of unsold inventories and rising unused capacities in factory plants mirror slackening demand and feeble investment.
Automobile showrooms have not been reporting brisk activity, implying lower spending ability and flat income growth. Automotive hubs such as Manesar, Pimpri-Chinchwad and Chennai are experiencing a lot of pain.
Tractor and motorcycle sales – indicators of rural demand – continued to contract. As per the data released by the industry body SIAM, vehicle sales across categories fell to 18.25 lakh units in July, down from over 22.45 lakh units a year earlier. Previously, the biggest slump of 21.81% was seen in December 2000. The decline in July was led by the passenger vehicles segment, which saw sales plunge almost 31% to a little over 2,00,000 units.
“The slowdown seems deepening… low consumer sentiments with dim demand outlook over the next two quarters remain a cause of concern for the industry,” said Saket Mehra, Partner, Grant Thornton India.
Readers aren’t unaware of the infamous Jet Airways issue which clearly was a signal for all of us of an economic crunch that was at bay. But sadly, even the people entitled to look into such matters have turned a deaf ear and are constantly making floaty statements like “everything is alright.”
The Economic Times says that as of August 2018, there were 570 aircrafts flying in the Indian skies and as of August 2019, there are 600 aircrafts still. This is despite 110 Jet Airways planes being grounded. Aviation secretary Pradeep Singh Kharola said, “We have resilience in the aviation sector even after Jet Airways went down. There was 5-6 per cent capacity growth in the sector. Fares are coming down now because competition has picked up. Festive season is coming up and we will see more participation in the next few months.”
Unemployment is an issue of great concern in recent times, as according to official reports, a 66.8% crunch in employment in the manufacturing sector has caused a huge chunk of youth population to sit back and sigh. Anti-dumping duties are levied to provide a level playing field to local industry by guarding against cheap below-cost imports.
The young generation of our country who is striving to get access to the means of their livelihood, the so called “youth oriented” government of our country is not failing to give blunt excuses to our Indian citizens.
The reports also state that no strict action has been taken by the Directorate General of Anti-Dumping and Allied Duties Committee though they have expressed a huge shock on the 2 lakh job loss due to the same.
Former Prime Minister Dr Manmohan Singh put the blame on demonetisation and GST for the current economic slowdown and said, “The withdrawal of 86 per cent of currency plus GST, because it has been put on practice in haste, there are lots of glitches which are now coming out. These are bound to affect the GDP growth adversely.” He further said that the informal and small scale sectors were badly hit by the demonetisation.
Though the tall claims of the government which implied that GST and demonetisation would be instrumental in economic growth are posing to be completely opposite of its promises. According to Indiatimes, owing to the cancellation of a huge chunk of Indian currency, as a result, manufacturing growth slowed to 1.2% in the June quarter from 5.3% in the preceding quarter while mining activity contracted by 0.7%.
However, construction activity revived marginally from the negative print (-3.7%) in the March quarter to 2% in the June quarter, signs that the impact of demonetisation is receding.
Another significant indicator of the economic ebb is the withdrawal of the foreign investment. The annual growth in gross FDI and FDI equity inflows has fallen into single digits since 2016-17 with the latter registering a negative growth in 2018-19. Another key trend is seen in the repatriation and reinvested earnings (earnings that are ploughed back into the Indian economy). Both show negative trends, indicating more capital is flowing out, diluting the FDI’s potential benefit to the Indian economy.
Overall it’s quite evident that amidst the hype created around the claim made by prime minister Narendra Modi of driving the Indian economy to 8% actually looks like a mirage in a no man’s land. Grave economic consequences await us in the near future which will be directly or indirectly affecting our livelihood in particular and our countrywide development at large.
No matter how sugar coated false promises are made by our legislators, the fact which is inevitable is the GDP slump will severely put dire obstacles in arenas of future foreign investment projects, in showcasing Indian economy as a serious competitor in the field of industrialization et al.
Cutting down of nearly 50% of the current production in the span of about 8 months insinuate that human resource management is at a serious fault which can lead to situations of brain drain and even withdrawal of current investments.
This is the point wherein we as citizens should rise and put up questions to the authorities who are apparently doing nothing and sitting in the veil of false hopes. We, as young India, who are trying to make our spot permanent amidst the economic giants of the world, should be standing up in solidarity and seek answers to these questions.