Essentials For Revival Of Economy
A weak economy is a state of economy in which growth is slow, flat or declining. When there are layoffs and no new jobs being created, consumers tend to save money or spend less. With less consumer and business spending, there's less money in the economy. As a result, a decrease in demand for goods occurs which leads to lower growth rates for companies and the overall economy.
Growth in an economy is measured as the Gross Domestic Product (GDP). GDP is the aggregate total of all goods and services produce in a country.
There are two key factors which drive growth - consumer spending and Business environment.
Consumer Spending - If consumer spending is more, it might increase for example - purchases of clothes, Homes, Cars and electronic devices and many more. As a result, Employment and Jobs are created in industries such as Retailing of clothing sectors, Banks that supply the mortgages and credit cards that consumers use as also many businesses which caters to and sells to consumers.
Business Environment - Keeping in line with the growth prospects, companies tend to invest in their businesses for medium to long term by upgrading and expending their operations. It typically include purchases of equipment or technology to enhance their production facilities. In doing so, companies hire workforce to help with the added production, sales and marketing as well as Engineers to run the machinery. Increase in Business investment also helps ancillary businesses, Banks that lends to companies, so that they finance new equipment purchases.
As companies struggles with less cash and revenue, they first try to reduce their costs by lowering wages or ceasing to hire new workers which can stop employment. Growth recession can cause companies to report financial losses while some companies go bankrupt leading to companies laying workers off. Resultantly, consumers tend to save money or spend less, a decrease in demand of goods occurs and leads to lower growth for companies and overall economy.
INDIAN ECONOMY :
About a year back, when slowdown began knocking at the Indian economy's door, it was hard to imagine its sound and fury would be felt across industries like in Automobiles, FMCG, Consumer durables, Cement, Real estate and even in Financial services all at once. The consumption, India's growth story have faltered as far back as five years ago. After all, Engine No.1 - Private Investment
begun sputtering that far back. Second engine - Exports peaked in 2013 had been on a downward
spiral since then for the past five years. he economy was chugging along with two engines -Public
Investment and Consumption which is why the slowdown became visibly clear as soon as consumption began falling about a year ago. So, in order to increase consumption (in the short run)
need to -
- Relax FDI rules
- Reform banking
- Make GST simpler
- Get RERA implemented throughout the country
- Make IBC simpler and Time bound
- Introduce Investment allowance for few years
In the long run, Structural reforms to make recovery possible. These are -
- Labour reforms - Reduce compliance time and costs
- Land reforms - to make land available to industry
- Ease compliance /cost of doing business throughout the country instead of in Delhi & Mumbai
- Govt. the biggest litigator with over half the cases pending in the courts, to exercise caution in
appeals.
Consumption is the only way to revive the economy in short term. Everything else is a long term horizon that is essential but can't deliver immediate results, as well as consumption can.
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Growth in an economy is measured as the Gross Domestic Product (GDP). GDP is the aggregate total of all goods and services produce in a country.
There are two key factors which drive growth - consumer spending and Business environment.
Consumer Spending - If consumer spending is more, it might increase for example - purchases of clothes, Homes, Cars and electronic devices and many more. As a result, Employment and Jobs are created in industries such as Retailing of clothing sectors, Banks that supply the mortgages and credit cards that consumers use as also many businesses which caters to and sells to consumers.
Business Environment - Keeping in line with the growth prospects, companies tend to invest in their businesses for medium to long term by upgrading and expending their operations. It typically include purchases of equipment or technology to enhance their production facilities. In doing so, companies hire workforce to help with the added production, sales and marketing as well as Engineers to run the machinery. Increase in Business investment also helps ancillary businesses, Banks that lends to companies, so that they finance new equipment purchases.
As companies struggles with less cash and revenue, they first try to reduce their costs by lowering wages or ceasing to hire new workers which can stop employment. Growth recession can cause companies to report financial losses while some companies go bankrupt leading to companies laying workers off. Resultantly, consumers tend to save money or spend less, a decrease in demand of goods occurs and leads to lower growth for companies and overall economy.
INDIAN ECONOMY :
About a year back, when slowdown began knocking at the Indian economy's door, it was hard to imagine its sound and fury would be felt across industries like in Automobiles, FMCG, Consumer durables, Cement, Real estate and even in Financial services all at once. The consumption, India's growth story have faltered as far back as five years ago. After all, Engine No.1 - Private Investment
begun sputtering that far back. Second engine - Exports peaked in 2013 had been on a downward
spiral since then for the past five years. he economy was chugging along with two engines -Public
Investment and Consumption which is why the slowdown became visibly clear as soon as consumption began falling about a year ago. So, in order to increase consumption (in the short run)
need to -
- Relax FDI rules
- Reform banking
- Make GST simpler
- Get RERA implemented throughout the country
- Make IBC simpler and Time bound
- Introduce Investment allowance for few years
In the long run, Structural reforms to make recovery possible. These are -
- Labour reforms - Reduce compliance time and costs
- Land reforms - to make land available to industry
- Ease compliance /cost of doing business throughout the country instead of in Delhi & Mumbai
- Govt. the biggest litigator with over half the cases pending in the courts, to exercise caution in
appeals.
Consumption is the only way to revive the economy in short term. Everything else is a long term horizon that is essential but can't deliver immediate results, as well as consumption can.
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