Slowdown In Indian Economy And Its Revival

Much has been written and said about the ongoing Economic slowdown in Indian Economy. It
was being indirectly said about various economic indicators warning signals for the last year
or so, which has triggered into the present criticism of GDP coming down which has suddenly
brought the issue into a full public glare.
In fact, India was as the fastest growing developing country for the last two years, slowdown
has also caught many of those making such claims by surprise. The reasons attributed to this
fall can be viewed as under-
1. Fall in private consumption and Investment freeze leading to double event with a powerful
    and unpleasant effect. Private consumption has taken a beating due to Demonetisation as
    consumers suddenly prefer to hoard cash or in Banks instead of spending on consumer goods.
    This led to withholding  of Investment by SMEs since they too operate on cash basis and the
    cash crunch left them dry. Fall in Demand and supply bottlenecks mean that there is a broad
    slowdown across the entire value chain of Demand and Supply dynamics. This is to be noted
    that besides slowdown in SMEs, Big corporates are as much to blame since they are drowning
    in Debt, they accumulated during the Boom period in the first decade of 21st century. It is a
    fact that this has contributed to a freeze on Investment by industrial houses who are now
    paying down the debts or postponing debt repayments to ensure that their present cash flow
    is sufficient in business.
    In addition, Public Sector Banks are saddled with NPAs that have resulted in them tightening
    lending and instead seeking deposits and repairing their Balance Sheets by making provisions
    for Bad Loans.
2. GST hampered small businesses more than Demonetization to hold on inventory until they
    shift to GSTN and become compliant to its number of rules and regulations being a part of
    tax.
3. Fall in exports - India being a net commodity exporter, there has been a slump in volume of
    exports.
4. The slowdown means for Graduates and Professionals who would be finding it difficult to
    get jobs as well as rise in salaries. In addition, policies by Trump and Brexit administration
    uncertainties have worsened the situation further.
5. The slowdown is also a part of long-term structural shift wherein economy is shifting from
    high investment to low investment era as well as transition from being cash-driven economy
    to a digital driven economy. This can be seen in Real Estate sector that has come to grind
    recently and has also contributed to slowdown.

All in all, these factors caused a storm for the Indian economy and there has to be a time lag
before one can reasonably expect a turnaround.

With an aim to acquire US $ 5.00 Trillion economy status, India has to consistently
achieve a minimum of 9% + Growth for five years. Many sectors like Real Estate,
Automobiles, Manufacturing, Agriculture are lagging behind in achieving the desired
growth rate and jobs in these sectors are not only going down but are trimmed also. No
demand-No investment vicious circle operates. All four contributors to economic growth
- Domestic Consumption, Exports, Private Investments and Govt. spending are hit by slow
down.

To come out of this sluggish movement in Indian economy, following remedies are suggested-
1. More Govt. expenditure to spur Demand and Investment in the economy.
2. Let Indian Rupee be weaker to increase export potential, since more Imports are eating into
    the Domestic market.
3. Lower Lending rates.
4. Certainty in business environment is required - out of the demonetisation shock.
5. Acknowledge and spend in Rural areas, Construction and the unorganised sector.

Accordingly, if the due corrective steps are taken, Indian Economy would come back on the
rails with a high growth achievement of 9 to 10 percent.



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