The Indian economy has been passing through a falling phase since 2016. Are we failing both at understanding the seriousness of the situation and developing coping strategies to deal with the breakthrough? To understand the ‘fall of the economy’, we need to know what’ rise of the economy’ means.
“Economic growth is a rise in the production of commercial goods and services, compared from one period of time to another. It can be measured in nominal or real terms. Traditionally, aggregate economic growth is measured in terms of gross national product (GNP) or gross domestic product (GDP), although alternative metrics are sometimes used.”
The Indian economy is in its lowest rise and is falling at the pace of a crashing aircraft. Though some positive growth can be noted yet, it disappoints to cope up with the global standards. The promises of the government seem to be decaying as the hope for the $5-trillion economy in 5 years drastically see a comedown. India’s GDP growth has fallen from 9.2% in the third quarter of the year 2016 to 5.7% in the current 5% in the June quarter of 2019. It is the lowest mark in the 6-year tenure. The current market suffered a loss of Rs 12 lac crores in the first 50 days. The government announced a series of steps to face the obstacles and put the growth back on route. Is it just a vicious circle, or is it more than that?
Who is Being Affected?
A number of reasons can be listed for the receding economy, namely, demonetization & stressed banking sector, GST Implementation and problems in Agriculture sector. Major industries providing the maximum employment have been affected by the slow economic growth and low GDP. To sum up, some industries and companies to have suffered significant losses are:
1. The Automobile Industry:
The automobile sales in India dropped to a massive hit of 18.71%, the lowest ever recorded in the previous 19years. The losses resulted in the firing of 15,000 employees over the duration of the past two to three months. The sale for the Domestic cars was down by 35.95% at 1,22,956 units as against 1,91,979 units as on July 2018, in accordance with the data released by the SIAM (Society of Indian Automobile Manufacturers). The motorcycle sales had declined to 18.88% in the previous year period. Total two-wheeler sales dropped to a scorching 16.2% to 15,11,692 units against 19,17,406 units in the year-ago month. The last most notable decline across overall domestic automobile sales was recorded in December 2000 when it fell to 21.81%. Overall, passenger vehicle sales drop by 31 percent in the month of July.
2. The Telecom Industry:
One of the major setback suffered by a slow economy has been by BSNL. In April, BSNL announced the news of it laying off approximately 54,000 employees. The state-run telecom operator BSNL (Bharat Sanchar Nigam Ltd), approved 3 of 10 suggestions put forward by the government panel having expertise. One of the recommendations included lowering the retirement age from 60 years to 58 years. Another one being the introduction of VRS package. The total of the moves given above would help save Rs 13,895 crore on wages and Rs 1,671 crore to Rs 1,921 crore annually but at the cost of Rs 13,000 crore respectively.
3. FMCG Companies:
The sales of FMCG or Fast Moving Consumer Goods products has dropped immensely over a period of 1 year. Hindustan Unilever, the floral ‘U’ of the country has a really slowed down the rate of volume growth between April 2019 & June 2019 to 5% from 12% the previous year. A number of other companies, including Parle, have been willing to lay off if the demand for the products is not met leading to reduction of over 8,000 to 10,000 employees. Dabur India, showed a growing volume of 6% during the month of April and June 2019, versus 21% the previous year. Britannia witnessed a downfall of 6 % from 13% mark last year. The FMCG growth rate dips to a low of 9-10% in the rural market.
“However, we’ve grown only 6%, and the market is growing slower than that. And that’s a little bit of a worry, because even for a Rs 5 product if the consumer is thinking twice before buying it, then there is some serious issue in the economy.”
-Varun Berry, Managing Director, Brittania Ltd.
Other sections of the economy that have been affected or are affecting the economy are the imports ( except oil, gold, silver), bank lending to industry, final steel produce, and net exports.
The gravity of the situation pulls the employment rate lower
The economic slowdown resulting from the low demands from the public has resulted in a moderate pace of economic growth, which has led to the unavailability of jobs in an already jobless economy.
A couple of times data and surveys issued by the National Sample Survey Office (NSSO) and Periodic Labour Force Survey (PLFS) tried to release evidence proving the falling GDP and rising unemployment of the nation but was often brushed off by the authoritative alliances that postponed the verification of the authenticity of the survey. The results were withheld by the NDA government that released the data after winning the Lok Sabha election. However, the government attempted to destroy the credibility of the surveys but was later approved by an expert committee on several levels.
PLFS provides for data regarding the workforce, labor force, and unemployment. To calculate an accurate overview of unemployment, certain factors have to be kept in mind, such as population. Surprisingly the Registrar General of India that has been providing the PLFS and other such entities with the most official population estimates, for the first time, did not release the statistics since 2011. Subsequently, India’s population on 1st January 2018 was 1.31 billion, consisting of 858 million rural and 457 million urban inhabitants. According to the figures, the total number of workers in the economy was 472.5 million in 2011-12, which fell to 457 million in 2017-18. The number of workers declined in 6 years was an absolute of 15.5 million, which has been recorded for the first time ever by the NSSO.
The Current Take on The Situation
Despite brushing off the statistical reports claiming the rising unemployment, the government has finally come to terms with the critical phase of the Indian economy. The MPC (monetary policy committee ) recently announced an odd 35 basis points rate cut to support growth. The industry believes that only stimulus package of Rs 1 lac crore and more could help them push economic growth. Manmohan Singh, former PM, elaborated his concern with the “all-around mismanagement” of the Modi government which has led to a “man-made crisis.” According to the former PM, domestic demand has lowered, and consumption growth is at an 18-month low. Nominal Gross Domestic Product growth is at a 15-year low. Tax buoyancy remains difficult as businessmen, small and big, are bothered, and tax terrorism continues which do not serve as a great example of economic recovery.
The only question that remains: Will the political alliances forget their differences to recover India’s economy before it leads to recession?