Economics Project

Analysis
by Group A6
Why RBI is keeping the repo rate constant despite the fall in
GDP?
When GDP falls RBI decreases the repo
rate.
Repo rate

Interest rate

Loan

Private investment

GDP
When GDP decreases repo rate is kept
constant by RBI.
• Repo rate decreases by 1.35% in the past 4 quarters.
• So, the inflation rate has gone up from 3.5-3.7% to 4.7-5.1%.
• For a developing nation the inflation rate should not go above
4, unlike in this case.
• Banks reluctance to sanction loan due to high NPA’s.
• The CITIZENSHIP AMENDMENT BILL 2019
• Migration of minority groups
• States not applicable .
• They are basically labour force…
• This should increase GDP of the country according to ISLM curve.
ISLM Curve according to what should
be if consumption increases.
BUT… in reality
• No effective increase in income. WHY?
• Skills of labour?
• Pay scale of such labours
• More supply of labour than demand – economic slowdown
• This will lead to fall in GDP per capita and an ineffective increase in
GDP overall.
• Recommendations.
Corporate Tax Reduction a BOON or
a BANE ?
 Corporate Tax Rate

Before Reduction After Reduction

New Enterprise – 25% New Enterprise after

Oct 1, 2019 – 15%
Existing Enterprises
upward of 30% Existing Enterprises
25.20 % including
Surcharge
Intention Behind Corporate Tax
Reduction

• Slowing Down of Indian Economy

• Making India Competitive in Tax Structure to
attract foreign Investments
• Boosting the Investments culture in the Country
by giving benefits to the manufacturer
Actual Scenario after Corporate Tax
Reduction
• Share Market got settled after initial surge
• Reserve Bank of India (RBI) has lowered growth forecast for the
country by 80 Bps (i.e 6.9% to 6.1%) for the year 2019-20
• International Rating Agency like Moody and IMF forecasted that
India’s GDP would grow less than 6% for the first time in the
decade
• Fiscal Deficit of the Government to rise by 1.5 Lakh Crores.
Q.)What Government could have done?
Ans) Dealing with Paradox of Thrift
Recommendation
• Giving Tax Benefits directly to the consumer
would have been a better choice
• Introducing the stimulus package to boost
Investments
• Introducing more rural employments like
MNREGA
Thank You