by: Sarwar Iqbal
The GDP growth rate of the economy has slipped to 5 per cent in the first quarter of FY20, the slowest in last six years. The continously rise in job losses from automobile sector to biscuits making industry has led to a general acceptance about economic crisis in India. This downturn has crept into several sectors including manufacturing, trades, hotel, transport, communication, construction and agriculture.
Growth rate of Gross Value Added (GVA) , i.e., GDP minus net products taxes, declined to 4.9% in the first quarter of this financial year as against 7.7% last year. Nominal GDP growth rate slipped to 8.0% compared to 12.6% last year.
causes of economic downturn
The recent collapse of automobile sector, rising number of non-performing assest (NPAs), sluggish consumer demand, slowing private investment and failing manufacturing sector, resulting in a destructive unemployment, are the key factors behind economic slowdown.
Automobile industry, creating 370 lakh jobs and distributing 12% to the national GDP, is suffering from a huge slowdown. More than 3 lakh jobs are lost in the sector.
There is also a sharp fall in Private Final Consumption Expenditures (PFCE) in the June quarter, to 3.1% as compared to 7.2% in the March quarter.
Manufacturing sectors sectors are experiencing a very slow growth rate. In April-June, it slumped to 0.6% as against to 12% last year in the same corresponding period.
As per RBI annual report for 2018-19, it insists that the deceleration in the economy is a kind of “cyclical downswing” rather than a deep “structural slow down”. But this statement needs to be pondered over.
Solutions for the downswing
To bounce back on the right growth trajectory, government needs to come out with several measures;
A: *Reduction of taxes ; It will reduce the cost of products and will increase PFCE, resulting in the reform of the economy.
B: Improvement of liquidity
Improvement of liquidity in the banking sector is also must to increase private investment and to come over the huge unemployment situation as it will help to create more and more jobs.
C: Rationalisation of GST
Even if it leads to the loss in revenue in the short term but will boost the economy in long term as GST has damaged several sectors especially MSMEs.
D: Revival of major job-generating sectors
Such as textile, auto, electronic and subsidised housing. Easy loans need to be provided for this purpose especially to MSMEs.