The Slowing Down of the Indian Economy

  • Dr. Ashish N. Pandya

Abstract

The Indian economy could expand by 5% in April June quarter 2019.  This crucial information was disclosed on 1st July 2019 the day, the NarendraModigovernment started functioning for its second term.  This was the lowest rate of growth in the last nine quarters and is likely to continue at least for one more quarter July-September 2019 if not more.  As a result of this, the Reserve Bank of India, the World Bank and the International Monetary Fund have reduced their estimate of Indias growth rate for the year 2019-20 to 6.1% from 7% that was published a few months earlier.  The downward revision relative to the April 2019 World Economic Outlook (WEO) to 1.2 percentage points for 2019 and 0.5 percentage point for 2020 reflects a weaker than expected outlook for domestic demand.  Growth will be supported by the lagged effect of monetary policy easing, a reduction in corporate income tax rates and recent measures to address corporate and environmental regulatory uncertainties.  The IMF said.[1] The slowing down of the Indian economy was in the making for quite some - at least since 2012-13 when exports and imports became stagnant around $300 billion and $500 billion respectively.  A robust increase in exports for a decade or two would impart tremendous dynamism to the economy by stimulating investment, spreading self-confidence and optimism among the business class and above all by creating vast employment opportunities.  The economic history of the world is replete with many examples in the 18th and the 19th centuries.  In the second half of the 20th century, China, South Korea, Thailand, Indonesia and Malayasia could register growth rate of above 8% with the increase in the exports at the rate of 10% or even more over a period of a decade or longer.  When the exports from India became stagnant after 2012-13, it was a n awakening call that went unattended.  From the fiscal year 2017-18, even the growth rate of GDP came down below 8%.  This was also not noticed.  It was only from July 2019 when the first quarter growth rate was shown to be only 5% that the government has taken note of this slowing down phenomenon.  The economy has not faced in a decade from around the 2008 global financial crisis and its aftermath the kind of headwinds it is confronting now.  The first symptom was visible over five years ago, when exports began to stagnate at a time when the global economy was pulling its weight.

Published
2019-12-18
Section
Articles