Why India is facing this slowdown?

Ms Jyoti Kumari, Assistant Professor, Department of Management

In December 2019, IMF Chief Ms.Gita Gopinath in 50th annual meeting of World Economic Forum in Davos said that India is responsible for 80% of slashed global growth. In December 2019 IMF predicted 4.8% GDP rate which fall from 7.2% GDP in April 2019.

Why India is facing this slowdown?

Unemployment: One of the strongest reason is Unemployment which is highest in 45 years which lead to lack of purchasing power left with audience. This is vicious cycle. Due to Unemployment there is lack of demand in market which leads to less supply and employee layoff. This has direct effect on Investment in manufacturing sector.

According to report unemployment is highest in urban area in contrast to that Food inflation is reaching to new peak and average consumption is getting shrink.

Fall of NBFCs ( Non-banking Financial Corporation) : After collapse of IL&FS there is a lack of confidence in market. Investors are not sure that they will get there return in current situation in Indian market. Credit which is provided by NBFC to people is getting shrink day by day.

Rollout of GST: GST filling procedure is very complicated for people. When Government launched GST they expected good amount of collection which got failed.

Failure of MAKE IN INDIA project of government: With the help of make in India project government had promised to bring more FDI to country. But Domestic as well as international Investment has declined. Even after corporate tax rate cut it begins to decline but government has altogether different expectation.

Fall of major sector : Name it automobile, telecommunication, aviation, real estate and so on. Major job creating industry is facing the heat of slowdown.

Income Inequality: In India 10% of population holds 75% of country’s wealth. This is one of the major reason for average consumption decline. As food inflation is on high peak survival is difficult for the people who are not in that 10%.

Many economists and politicians are saying that this inflation is structural and economy will be on track very soon. But Slowdown is not one day business it involves lots of time and strategies. Government of India tries to manage the inflation and slowdown with recent BUDGET 2020 which according to me was not much of help to the people of country and current condition of India.

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