Will India recover from declining (4.5%) GDP?

Will India recover from its declining GDP Growth Slowdown from 4.5 % in Q2? Factors, Measures and Discussion.

India’s GDP Growth Slow down More than Anticipated

Key highlights

  1. GDP numbers had declined for 5th consecutive now
  2. India’s GDP slowdown to 4.5 percent from 5 % in Q2.
  3. GDP forecast is even worse than the present.

The Indian economy hit 4.5 percent GDP in Q2. Which is further expected to reach even below 4 percent, due to slow down in private consumption, investment and export. The key factor observed in this slow down is the lack of credit to produce goods and demand in the market.  

The GDP of India has increased its pace of slowdown in the fifth consecutive time and reached 4.5 percent. In the second quarter of 2019-20 compared to the previous quarter it is a fall of 0.5 points. While compared to the previous year’s 2nd quarter it is a fall of 2.6 percentage points. The previous low was 4.3 percent in the final quarter of 2012-13.

Major figures of GDP.

  • The top eight core infrastructure industries showed an output decline of 5.8 percent in October 2019. The coal was the worst fall with 17.6 percent decline.
  • This major fall in GDP is due to a number of factors – a slowdown in private investment, unemployment, investment and export, lack of credit facility and demand in the market.
  • The massive contraction in agriculture, manufacture and mining activities pulled GDP.
  • At present, the economy facing severe demand slowdown with respect to high GST rates, farm distress, stagnant wages and liquidity constraints. This has subdued consumption and became a prime reason for the successive fall GDP growth rate.
  • Job losses in automobile, banks, real estate, mining, consumer durables etc.

Measures adopted to tackle GDP

  • To increase the supply of credit in the market, several incentives were directed to banks for enhancing lending. Decreased interest rates to lend money.
  • Withdrawal of ‘super-rich surcharge’ imposed on foreign investors
  • Exemption of start-ups from ‘angel tax’.
  • Infusion of Rs. 70,000 crore in PSBs and decreased corporate tax rate.
  • The government already announced several measures to boost growth including a reduction in corporate taxes, concessions on vehicle purchases, bank recapitalization.
  • The central bank reduced its borrowing cost 5 times and this year has seen lower rates again in the next meeting.  

India’s GDP Forecast

India's GDP Forecast
India’s GDP Forecast

India is expected to be 4.00 percent GDP by the end of this quarter, according to Trading Economics.

View of Economic Leaders

 Subramanian Swamy He had slammed Nirmala Sitharaman saying she ‘doesn’t know any economics’ and that the real growth was around 1.5%. He had told, two days before the GDP figures were revealed

“Do you know what the real growth rate today is? They are saying that it is coming down to 4.8%. I’m saying it is 1.5%.”

GDP Review by economists
GDP Review by economists
GDP Review by economists
GDP Review by economists

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