CURRENT AFFAIRS ARTICLE 1

India’s Growth Slowdown:

India’s gross domestic product (GDP) growth has dropped to 4.5% in the July-September quarter
of 2019-20, a free fall from the government’s ambitious call for a double-digit growth not so long
ago. Propelling India into a $5 trillion economic behemoth by 2024-2025 also seems implausible
now.
Data point out that economic slowdown did not begin in 2019. It had been building up over time.
Declining growth in consumption has been held as the primary factor for the current economic
downturn. It is about money in the pocket. Data tell that wages have been falling since January
2018 both in agriculture and non-agriculture work.
Consumption had begun its slide from a high of almost 10 per cent in September 2018 quarter.
It continued to decline till it reached an 18-quarter low of 3 per cent in April-June quarter 2019.
Private consumption has improved to 5 per cent in September quarter. It is a real good news. But
the damage has been done.

Economists, statisticians and civil servants, whom ET Magazine spoke to, give mixed reactions.
Former chief economic adviser to the government, Arvind Virmani, says the economy likely
bottomed out in September or October. “So I expect Q3 growth to be higher than Q2. The issue
now is what the government can do to accelerate growth recovery and reduce the time the
economy takes to return to the 7.5% growth track,” he says.

1
Not all, however, agree that a quick turnaround is likely if the government fails to undertake a
course correction. Former chief statistician of India, Pronab Sen, argues that the FM’s recent
packages have focused too much on the supply side. He wonders if these measures would propel
a quicker recovery.
In her first speech as managing director of IMF, Kristalina Georgieva said 90% of the world is likely
to have slower growth in 2019, signaling out India along with Brazil. “In some of the largest
emerging market economies, such as India and Brazil, the slowdown is even more pronounced
this year,” she said in her inaugural address in Washington DC on Tuesday.
Incentives were announced for almost every sector of economy including waiver of super rich
tax. But economic malaise is deeper. It has a lot to do with agricultural distress and sinking of real
estate ship. Agriculture has been under stress now for about two decades. The past 10 years have
been particularly bad for those dependent on agriculture. The worst sufferers have been the
marginal farmers.
Added to this is the fact that most Public Sector Banks are saddled with high NPAs or Non-
Performing Assets that have resulted in them tightening lending and instead, seeking deposits
and otherwise repairing their balance sheets by making provisions for Bad Loans.
It is not these factors alone, and the most important factor is that there is also a global economic
slowdown that is happening and given the fact that India is a net commodity exporter, there has
been a slump in the volumes of exports.
Lastly, the slowdown is also part of a longer-term structural shift wherein the Economy is shifting
gears from the high investment era to a low investment era as well as a transition from being
cash-driven economy to a digitally enabled economy.
Indeed, this can be seen most in the Real Estate Sector that has come to a grind in recent months
and hence, has also contributed to the slowdown. All in all, all the factors have caused a Perfect
Storm for the Indian Economy, and there has to be a time lag before one can reasonably and
realistically expect a turnaround.
The effects of the same on different sectors have been markedly distinct. Agriculture has been
the biggest loser with growth slumping to 2% in the last quarter, whereas services sector on the
whole has remained buoyant, thanks to a positive market sentiment post the general elections
in the summer. Manufacturing sector has suffered losses too with automobiles segment among
them seeing their worst run in over 6 years.

2
3