oppn parties Is The Economic Slowdown Intensifying?

News Snippets

  • Mobile operators Vodafone-Idea and Airtel decide to raise tariffs from next month
  • Sharad Pawar meets Sonia Gandhi and says more time needed for government formation in Maharashtra
  • Justice S A Bobde sworn in as the 47th Chief Justice of India
  • Supreme Court holds hotels liable for theft of vehicle from their parking area if parked by valet, says "owner's risk" clause is not a shield from such liability
  • Finance Minister says she is receiving feedback from many sectors that recovery is happening as there is lower stress
  • Sabarimala temple opens, but police bar the entry of women below 50 years
  • Finance Minister Nirmala Sitharaman says Air India and BPCL to be sold off by March
  • Media person Rajat Sharma resigns as DDCA president
  • Shiv Sena, NCP and Congress postpone meeting the governor of Maharashtra
  • Shiv Sena not to attend the NDA meeting on 17th November, says break up "a formality"
  • Shiv Sena says that the confidence the BJP is showing about forming the government in Maharashtra is based purely on its expectation of getting numbers through horse trading
  • Anil Ambani resigns as director of the bankrupt Reliance Communications
  • India beat Bangladesh by an innings and 150 rums inside three days in the first Test. Indian pacers excel after Mayank Agarwal's double century
  • Sena-NCP-Congress work out a common minimum programme, will form the government soon and it will last 5 years, says Sharad Pawar
  • Income Tax Appellate Tribunal upholds the decision to withdraw the charitable status of Young India, making it liable to pay Rs 145 in income tax. Rahul Gandhi and Priyanka Vadra are the majority shareholders in the company
Two Muslim litigants in Ayodhya refuse to accept the Supreme Court order, say review petition might be filed
oppn parties
Is The Economic Slowdown Intensifying?

By Sunil Garodia

About the Author

Sunil Garodia Editor-in-Chief of indiacommentary.com. Current Affairs analyst and political commentator. Writes for a number of publications.
The Indian economy is slowing down. Latest figures for the October-December quarter released by the Central Statistics Office confirm this. GDP has grown at only 6.6 percent in the third quarter this year, forcing a revision of the full year estimates to just 7%. This means that the last quarter growth will be just 6.5%, the lowest in 7 quarters. Full year gross value added (GVA) will only be at 6.85% which means that for three consecutive years, India will have a sub-7% GVA growth.

The drastic fall in agriculture and fisheries, from 4.2% in July-September to 2.7% in the third quarter is a cause for worry. Given the acute farm distress, falling rates show that the distress will intensify. This also means that rural incomes are falling and consumption will go down. Couple this with the reported shortfall in the sowing of the rabi crop and there is no doubt that farmers will continue to bear the brunt for a longer than expected time. Consumption spending data from the hinterland shows a drastic fall in demand.

Manufacturing is not rosy either. GVA in this sector has gone down to 6.7%. It was 6.9% in the second quarter and a robust 12.4% in the first. The Index of Industrial Production (IIP) shows the growth at 2.7% and it is drastically down from the 8.7% achieved in the same quarter last year. Only gross fixed capital formation (GFCF) expanded by 10.6% against the 10.2% logged in the second quarter. Fresh and big investments from the government are also not expected as it is in the last leg of its term and has already gone beyond its fiscal deficit targets.

These figures, when juxtaposed with the slowdown in China and Europe, the upcoming general election in the country and the worsening relations between India and Pakistan, do not raise hopes of an early economic recovery. With inflation in check, it is now upon the RBI to give a push to investment by making a bigger rate cut than the token 0.25 percentage points it made the last time. But one feels that in the absence of a huge rise in demand for goods and services, any rate cut will not cut much ice with investors. Since demand is not going to rise in a hurry, we are in for a period of consolidation. Things will probably improve from the second quarter next year with a new government in place and buoyancy for the September to November festival season.