Current Trends In Indian Economy
India has emerged as the fastest growing major economy in the world and is expected to be one of the top three economic powers of the world over the next 10 to 15 years, backed by its strong democracy and partnerships.
The Indian economy is losing its momentum slowly. Every big sector of the economy is affected by lack of demand. The RBI also reduced the GDP growth forecast of the Indian economy to 6.9 % in its monetary committee meeting. If we look at the data of big production or services sectors of the India, it is coming to the conclusion that it is slowly moving towards going for recession.
At one time, the influential private airline company Jet Airways has closed their aviation services. Air India is also going at a huge loss. BSNL which once identified the telecom sector is fighting for its existence today. The annual loss of the Indian Postal Service has been Rs. 15000 crore in financial year 2019.
All above mention Company has become the biggest loss making government company. The additional cash reserves of ONGC, India’s largest Crude Oil and Natural Gas Company, are declining rapidly. This company has come under the pressure of a huge debt due to the non-urgent acquisition by the government. The reason of slow economy growth rate is mention as:
- Problem in Banking Sector.
- Recession in Automobile Sector.
- Low rate of Economic Development.
- Fall in Saving Rate.
- Focus Need to Attention.
Problem In Banking Sector
The Non – Performing Assets (NPAs) of the Indian banking sector are about 11.5 % of net value, at present. The NPAs are unpaid bank loans by the concerned borrowers accrue huge debts. In this way government merges the banks. NPAs of many state-run banks have increased significantly. In such a situation, the government is completed to merge. According to experts, the NPAs of many banks has crossed 7 %. In such a merger, the government will reduce the NPAs of banks. The merger of banks will get rid of the NPA problem.
At present, 88% of the business of public sector banks will go from these 10 banks to 4 banks. This is expected to reduce the NPAs of these 10 public sector banks by 5% to 7%. The merger banks are:
Bank 1: Union Bank of India + Corporation Bank + Andhra Bank.
Bank 2: Indian Bank + Allahabad Bank
Bank 3: United Bank of India + Oriental Bank of India + Punjab National Bank
Bank 4: Canara Bank + Syndicate Bank
Recession On Automobile Sector
The downward trend in the Indian automobile sector in July 2019, with most manufacturers including the two-wheeler companies’ note down lower sale in this year compared to July 2018. The largest among all, Maruti Suzuki India sold a total of 109,264 vehicles a steep 33.5% lower than the 1.64 lakh units it sold last year.
The decline in the case of Mahindra & Mahindra was 15% selling just 40,142 units this year. The fall at Honda Cars India was even steeper with the Japanese major managing to sell only 10.250 cars in July 2019, a whole 48.67% less year-on-year. The second largest player in the automobile sector Hyundai sales of 57,310 in July this year was 3.5% lower than the number of vehicles the company sold in July 2018.
Automobile sales in India witnessed its sharpest decline in nearly 19 years in July, dropping 18.71 percent, rendering almost 15,000 workers jobless over the past two-three months as the sector reels under a prolonged slump, auto industry body SIAM reported. If the automobile industry goes downs the GDP will go down as the automobile industry account for half of the manufacturing GDP and employs around 3.7 crore people, directly and indirectly be added.
There’s no immediate signal from the government that it plans to do anything at its end to improve the situation.
Low Rate Of Economic Development
India’s economy grew by merely 5 percent in April-June quarter, down from 5.8 percent in the previous quarter, according to GDP data released by the National Statistical Office (NSO) on August 30, 2019. “GDP at constant (2011-12) prices in Q1 of 2019-20 is estimated at Rs. 35.85 lakh crore, as against Rs. 34.14 lakh crore in Q1 of 2018-19, showing a growth rate of 5.0%,” a government statement said.
The less-than-anticipated GDP growth rate puts further pressure on the Modi government to announce meaningful reforms that can bring back the economy on the growth trajectory. Finance Minister Nirmala Sitharaman addresses an economic slowdown in which she announced multiple mergers of public sector banks. She said the move was aimed at improving liquidity and enhancing economic growth. She said manufacturing and construction sectors play an important role in the weakest growth rate.
Fall In Saving Rate
In India’s saving have become less and less of a private virtue, with consumption rates rising and saving rate of households falling. The India’s saving rate will eventually affect investment into areas the country needs badly. Given that consumption rates are estimated to have raised in FY 19 to 59.5% the saving rates may have fallen again this fiscal. What’s more, while getting access to reliable jobs data has become increasingly difficult, economists point out that high unemployment rates are also to be blamed for the drop in financial saving rates. We wonder if the decline in overall saving rate is due to some reasons:
- Continued high consumption by households.
- Low job creation in general
- Increase in financial liabilities of households to support short-term consumption.
Focus Need To Attention
The Indian economy is running on weak figures in a strong government. Since the first full budget of Modi government 2.0, more than 12 lakh crore of investors have sunk in the market. The government is merely reacting to these figures rather than taking a decision. Instead of some major institutional reforms, the Indian economy is facing, the vagaries of policies. Demonetization became a major economic crisis instead of economic reform. The GST, which was touted as a major improvement, this step is also saw a poor impact on the Indian market.
Recently, the CAG has said in its report that GST is not working as per its nature. It is impacting the market. The government has to understand that small changes are not called institutional reforms. The continued decline in the economy looks to be lasting for a long time. Therefore, the government will have to make major and extensive changes in the economy.