Five reasons why the economy is slowing down
Rating agency Crisil on Thursday lowered the gross domestic product (GDP) growth forecast by 20 basis points to 6.9% for 2019-20, citing weak monsoon and slowing global growth. This is marginally higher than the 6.8% GDP growth last fiscal, but lower than the 14-year average of 7%. Here’s a look at the reasons for the slowdown...
Demonetisation that happened in November 2016, dealt a severe blow to consumption, leading to a vicious cycle of job loss and lower income, which led to further drop in demand (what economists call the multiplier effect). Next shock came in the form of a reform — when GST was rolled out in July 2017. This had a knock out effect on exports growth in the year of implementation because of delay in refunds to exporters.
Just as the effects of DeMo & GST were petering out, the IL&FS crisis triggered the Non Banking Financial Companies' (NBFC) credit crunch in 2018. By 2018-end, weakening global trade and GDP growth, led by US- China tariff wars, had caught up, amplifying the impact.
Since 2016-17, the monetary policy was focused on inflation control, which ensured interest rates remained hard. The combined fiscal deficit of the Centre and the state was high. And the government committed to lowering its fiscal deficit, left little wiggle room for government to increase its spending to pump-prime the economy.
With the US-China trade war, global sentiments have remained poor, making the prospects of an export led growth bleak. Add to that, a looming Brexit with its pioneer Boris Johnson now the PM of UK. All this made the economic outlook appear bleak.
Crude prices favoured Modi in the first three years of his first term, but prices have firmed up after that, putting inflationary pressure.
The NPA ratio worsened throughout the UPA-II term and is still quite high. But no sooner did the NPA ratio start improving in fiscal 2019, the NBFC stress started building up. Stress in NBFCs percolates faster than public banks, because of its greater interconnectedness to mutual funds, banks, and corporate sector.
Non-food inflation continued to surpass food inflation in the past two years, amounting to income transfers from rural to urban areas.
ICRA, too, has flagged concerns
Data from ICRA too shows that seven out of 16 key segments contracted in the last one year. Aditi Nayar, principal economist ICRA says, “The performance of the early economic indicators was unfavourable in June 2019, with as many as 12 of the 16 indicators displaying a deterioration in the year-on-year growth. Moreover, seven of the indicators recorded a year-on-year contraction in June 2019, which is likely to weigh upon industrial growth in June 2019.
“In addition, the quarterly trends for Q1 FY2020 compared to Q1 FY2019 reveal a broad-based deterioration in the growth trajectory. For instance, the performance of 12 of the 16 indicators weakened in Q1 FY2020 compared to Q1 FY2019, such as, auto production, Coal India Limited’s (CIL’s) output, thermal electricity generation, non-oil exports, port cargo traffic, rail freight, passengers carried by domestic airlines, as well as ATF and diesel consumption. Furthermore, auto production, non-oil exports, and ATF consumption recorded a YoY contraction in Q1 FY2020”, adds Nayar.
译文来源：无极4 http://www.abaripsen.com/48163.html 译者：Jessica.Wu
casper tt•2 hours ago
Dumb govt is still clueless and hoping for better. And yrt they all speak loud mouth for development. Weak economy can never sustain development.
Javed Badshah•uae•2 hours ago
First reason crisil has given is weak monsoons. how are they saying this with India inundated with water everywhere.
C M Gupta•2 hours ago
10% increase in bank deposits ( not 19 %)
C M Gupta•2 hours ago
If it is so, why GST collection is increasing. There is 19% increase in bank deposits, shows that there is more savings. Yes there was draught like situation in counylast year which have some impact. Now rain have pick up
Sundar Sundar•2 hours ago
The day is fast approaching when we will remember with gratefulness the educated and brilliant mind of Dr.MMS who steered this nation through the worst global recession with crude oil 60% more costly than it is now.
Sajjad Nakhwa•2 hours ago
AND AMIT SHAH CALLING MODI A GREAT REFORMER.... WHAT A JOKE... OUR INDIA IS SINKING JUST BCOZ OF FEW ILLITERATE LEADERS
Shriram Karpur•Cincinnati•2 hours ago
Do you not want Kashmir problem solved as an Indian citizen ? Economy goes up and down. What''s new in that ? Govt taking serious steps to reform Kashmir is new and note worthy. U should support it.
Krishna Nair•Prasad•3 hours ago
Media is creating hype for TRP and money making debate.
Raju Alankar•Hubli•3 hours ago
It''ll regain it''s ranking.
Mahmoodullah Hussaini•Unknown•3 hours ago
hahaha India was going to competes with china
pkd1954 Kumar•KOLKATA•3 hours ago
This is just a post operation period and will heal within months. The collection of GST is an indication.
Vishwanathan Prasad•3 hours ago
The gang of this Rahul Shiv Shankar and Navika Kumar think they r the only saviour of economy. When will the government gag this media.
Krishna Garg•KOTA-Rajasthan•3 hours ago
No point in CRYING FOR SPILLED MILK ,reasons and analysis with data are for understanding the trend.What needs to be done is important ?,Until and unless Foreign investments are available for the market ,revival of economy can not be accelerated.
Rajeev Sharma•Unknown•3 hours ago
Just to win UP elections modi destroyed Indian economy
Anthony Kalia•3 hours ago
Manmohan Singh kept the GDP growth at 8 to 9 percent in very hard circumstances when International Crude Oil was at 120 USD barrel, and these two criminals and buffoon Modi and Amit shah has destroyed the economy even when international crude in at 60 usd barrel shame on Modi and shame on indian voters who elected this buffoon Modi.
Prabhakar Rao Tirupattur• Anthony Kalia•Tirupathi, India•3 hours ago
You are correct
Chetan Kotian•3 hours ago
You vote out great economists like Dr. Manmohan Singh and what do you expect ????