India’s Growth Slowdown: the Reasons and the Fixes

For the financial year 2018-19, the economy of India is slightly moved down just because of the falling growth of individual consumption, a moderate rise in muted exports and fixed investment, the Finance Ministry has stated in its tardiest monthly report. The ministry of finance states as the present GDP growth has seen a drop, individual consumption in the financial year Q4 has also moved down that is indicated in the growth decline in the sale of two-wheelers. The CSO has also rived in its Q3 national account records about a descending course in the growth assessment for the financial year 2019 from 7.2 per cent to 7 per cent that is the weakest in the last 5 years.

A report from the ministry of finance states the practical experimentation on the supply team is to invert the decline in the agriculture industry growth and support the momentum of growth in the concerned industry. Though there are expectations that the existing account shortfall as a ratio to Gross Domestic Product will drop in the last quarter of FY19, it states, supplementing it will restrict the growth momentum leakage from the overall Indian economy. The report, still, pretends India continues to be the most dynamically developing major economy that may expand aggressively in the future.

Reasons Of Drop In Indian Economy

THE DECLINE IN INDIVIDUAL CONSUMPTION & INVESTMENT FREEZE CAUSING DOUBLE HARM

So, what are the causes of the Indian economy slowdown? To begin with, individual consumption has been dropped down due to Demonetization. As a result, buyers swiftly favor saving cash rather than spending it on consumable items.

Furthermore, the demand for products has mainly dropped in the areas associated with rural communities. The whole rural life activities depend on cash and Demonetization has put a full stop to cash flow which eventually leads to lack of employment as well as earnings whereby pressing the rural buyer who now favors to wait & watch and to delay consumable goods other than the products and services that are primarily needed.

HIGHER DEBT

Appended to this is the truth that most government-owned banks are burdened with substantial Non Performing Assets (NPAs) that have resulted in them stretching lending and rather than attempting deposits & unless restoring their balance sheets by creating procurements for Bad Loans.

Admittedly, wanting recapitalization of these public sector banks, one may clearly see a faulty sequence wherein poor debts and collapse in requirement point to no borrowing and no new investment along with consuming anything.

The sequence ought to be cracked someplace, and this is where the RBI and Indian Government have to take collective step.

Another fact is that this has played a role in freezing the investment by organizations and associations who are as of now spending down the debt or delaying debt indemnities to make sure that their existing cash flow is enough to stay in the race of competition with other businesses.

THE IMPACT OF DEMONETIZATION

Admittedly, Demonetization is one of the major role players in slowing down the Economy of India that has collapsed the demand. We can say that the supply and demand dynamics value chain has faced a drastic slowdown.

Therefore, what we own is a circumstance wherein money has drained up, pointing to a decline in the Indian economy.

One should also keep in mind the fact that it is not just the small businesses and individual consumption resulting in the Economy slowdown.

Certainly, the large-scale organizations are also playing a role in the slowdown as they are sinking in stocks that they acquired during the last decade Boom Years.

GST IMPLEMENTATION

After Demonetization, the GST implementation on a national basis is unquestionably a significant determinant in the fall of Indian Economy and GDP.

GST has hindered the SMEs more than Demonetization by bounding them to reserve about to deliver products until they move to the GSTN and become obedient with the broad range rules & regulations as per the GST norms.

It can be assumed that the rollout of Goods and Services Tax is also distorted, thereby intensifying a few of the factors that have played a leading role in the fall in the Indian economy.

How Can Indian Economy Be Brought On Track

Leading market researchers, economists, and statisticians recommend some of the solutions to drive back the economy of India on the high growth route

HIGHER GOVERNMENT INVESTMENT

The government requires contributing more to deal with the current situation. Even though the government has previously spent a lot of its estimated investment, it requires to pay out more to encourage interest & investment in the economy. An instant lift without bothering much for results is required by means of spending. 

LET INR BE WEAKER

Even a less valuable INR will not hurt. The stronger INR is harming both the businesses &  the exports. Imports are growing, and they are feeding into the share of local marketplaces. As of now, India requires growth, so instead of focusing on ratings, try to put some efforts on growing the Indian economy.

REDUCED RATES OF LENDING

The newly declared RBI's financial policy has not provided any relaxation and signs to promote the economy of India. The statisticians now develop a precipitous rate reduction in the benchmark rates of lending to acknowledge financial policy extension. The RBI requires to reduce the rate of interest for banks, through turning lending more affordable for the organization & encouraging investment.

BUSINESS CERTAINTY NEEDED

Higher certainty in the environment of enterprise is much needed. Enterprises should be without collapses, such as demonetization. In reality, after the demonetization collapse, there is an atmosphere of ambivalence in the Indian economy. This hinders the private industries inadequate of proclaiming the new projects. An atmosphere of conviction, certainty, and self-confidence is required to make it sure that no disruptive transits would freeze the economy in the future.

NO NEED FOR EXCUSES: RECOGNIZE AND CONTRIBUTE SOME FUNDS IN RURAL REGIONS

The government should have to use their financial budget in improving the status of living in rural areas. The rise in the income of rural inhabitants can push up the demand for consumption that eventually boosts the business. To generate more consumers demand the Government requires investing more in rural areas, the unorganized sector, and construction sector.