Centre for Monitoring Indian Economy, popularly known as CMIE, has reported that India’s unemployment rate has hit a three-year high. The unemployment rate in October rose to 8.5%, the highest in over three years and up from 7.2% in September 2019. It is reflecting the slowdown of the Indian economy. The highest unemployment rate is in Tripura and Haryana, which is 20%, whereas Tamil Nadu, with a rate of 1.1%, stood at the last place.
In the financial year 2018, the unemployment rate was 6.1%. The growing rate of unemployment is a matter of worry, and the current BJP-led NDA government must look into the matter and act seriously.
A few months ago, the Finance Minister of India made a statement, which led to a heated debate in the country. In her statement, FM Nirmala Sitharaman pointed her finger towards the millenials of the country and held them accountable for the auto sector crisis—just because they prefer to use Ola and Uber cabs.
The auto sales in India have declined for the continuous 10th month. Even the demand for diesel has fallen by 7.4% in October due to the current economic situation. Data released by EPFO shows a 26% fall in the average monthly job creation since October 2019, and this data can scare them even more. Also, a survey found that over 33% of skilled Indian youth are jobless.
India’s manufacturing output grew at its slowest pace in two years in October, and also, our domestic automobile sales witnessed a decline of 12.34% in June. This decline in automobile sales led to a job loss of 3 lakhs since April. Low demand or no demand plays a huge role in affecting our economy, and it is also considered as one of the biggest reasons behind the slowdown.
According to Rajnish Kumar, the chairman of the State Bank of India, which is considered as the most prestigious public sector bank of the country, there is an obvious slowdown in demand which is visible in every sector.
Gross Domestic Product (GDP): The Most Talked Term In The Current Economic Crisis
The GDP growth rate in the second quarter ( July-Sept) of 2019 is the lowest in the last six years, which is just 4.5%, according to the data released by the National Statistical Office. The contraction is visible in the manufacturing as well as the industries index. The overall GDP is being affected because of the negative growth rate in both of these sectors. India is now no longer the world’s fastest-growing major economy because of the slowdown in our economic growth.
Former Indian Prime Minister Manmohan Singh suggested five steps to solve the following issue. The steps include rationalization of GST, focus on increasing rural consumption and reviving the agriculture sector, solving the liquidity crisis, and reviving the major job-generating industries such as textile, auto, electronics and subsidized housing. He also said that easy loans need to be provided for this purpose, especially to medium and small enterprises. According to him, the government needs to identify new export markets opening due to the ongoing trade war between the United States and China.
The condition doesn’t seem to improve even in the next financial year because NCAER has predicted the GDP growth rate in India for the FY 2020 at 6.2%. According to the economic survey 2018-19, India would have to grow by 12% a year to become a $5 trillion economy in future, which is almost impossible if the condition doesn’t change.
Demonetisation and faulty implementation of GST are considered as the biggest reasons behind the current crisis. IMF has also cut its projection for India’s GDP growth in the current financial year by 0.3%, which is a bad sign for the world’s largest democracy. The rank of the Indian economy is continuously declining. We have shifted to the 7th place from the 5th, and the following data is reported by non-other than the world bank.
The food prices in India faced the worst hit of this economic slowdown. Consumer Price Index inflation rose marginally to 3.2 % in August 2019. Onions are giving even more tears as the price for a kilogram is now 80 Indian rupees. NSO reported that consumer spending has seen its first fall in four decades. The Indian rupee is also in ICU like the economy as it suffers the biggest fall in six years against the dollar.
The saddest part is that the stand of the government is still not clear on the following issue. Several renowned economists, including former Prime Minister Manmohan Singh, have suggested several ways to revive our economy, but the current government is yet to acknowledge this. Despite all the noise pollution, media channels barely ask questions to the government on the economy, and this provides even more freedom to the government to stay calm on the Indian economic crisis.
The global economy, on the other hand, is also facing a huge crisis. The heat between China and the United States is also at its peak. The game of currency war, as well as the trade war, is on. The total tariffs applied exclusively to Chinese products by the US are $300 billion, while the total Chinese tariffs applied to the US goods are $110 billion.
The International Monetary Fund has said that the trade war between the US and China is dragging on global growth. Last month, it said that the conflict would cut the growth by 0.1% points in 2019-20. This trade war can easily push the world towards the global economic slowdown, and the biggest example to prove this fact is the Great Depression of the 1920s. The Great Depression of 1920 was also the result of a trade war. Only time will tell in which direction the winds of the five oceans blow.