Indian economy is in a bad shape. The government must not shy away from consulting experts and in accepting advise from them and business leaders. We are facing a national crisis and need to formulate an effective response.
THERE IS hardly a day when newspapers don’t report one or the other parameter showing loss of jobs, rising inflation and slowing down of the economy. Instead of getting stabilised, the situation is worsening.
The latest official figures released by National Statistical Office show a dismal figure. Pulled down by weak investments, contraction in manufacturing and lower consumption due to poor demand, the country’s Gross Domestic Product (GDP) growth rate has been recorded at a poor 4.5 per cent. This is the lowest quarterly growth rate in the five-and-half years of the NDA government led by Narendra Modi. The previous low was 4.3 per cent during January-March quarter in 2013.
The GDP has been consistently on the decline over the more than two years.
While demonetisation, whose third anniversary has just passed by, continues to impact the economy, the faulty and hasty roll out of the Goods and Services Tax (GST) and the world wide slow-down in economy are some of the causes that have contributed to the present situation. Add to it is the slow and inadequate response of the central government which is yet to take the bull by its horns.
The singular most important fallout is the loss of jobs. Rather than creation of more jobs or at least stabilisation of the employment situation, what is really worrisome is the sharp decline in jobs both in government and private sectors.
The impact, according to official statistics, is more in the rural and semi-rural areas. This is reflected in the rising number of beneficiaries under the MGNREGA scheme which was designed to provide minimum employment guarantee to the poorest of the poor non-skilled persons. What’s more, there is a sharp increase in the number of youth taking benefit of MGNREGA rather than the middle aged or older people dominating the list of such beneficiaries in the past.
The urban unemployment rate, according to the periodic labour force survey, has touched 9.3 per cent which is the lowest in the last one year.
Global rating agency, Moody’s, which is considered highly credible, has cut its outlook on India’s ratings from 'Stable’ to ‘Negative’. Its implications are serious.
While it indicates that the state of economy was unlikely to improve in the near future, the immediate impact of the figures was a sharp fall in stocks, currency and bond market.
Lakhs of employees have been laid off by small and medium scale companies to cut costs. Contractual workers in auto and real estate have been the first victims of the economic slowdown.
The country’s auto sector, which contributes to over 7 per cent of the GDP and which employs over 3.5 crore employees, has already laid off more than 3 lakh workers. It is the country’s largest private sector employee and includes thousands of ancillary units.
The worrisome situation is reflected in the plummeting sale of vehicles, including passenger cars and commercial vehicles. The sale figures are worse in the last two decades. Auto makers have warned the government that millions of jobs would be lost if immediate steps are not taken to improve the situation.
Part of the crisis in the auto industry is due to government’s ambiguous policies and uncertainty in the market.
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Another major sector which is under strain is the real estate sector. There was much hope that it would get a boost during the second tenure of Modi government. In between there were some signs of improvement but the situation is again on the decline. Lakhs of contractual and daily wage workers have already been laid off in the real estate sector.
Again it is the liquidity crunch that started last year along with the long term impact of demonetisation is being cited by experts as the key reasons for the slow down of the economy.
The Centre for Monitoring Indian Economy has said that the country’s unemployment rate has hit a three-years high of 8.4 per cent and that the current unemployment rate is the highest since September 2016.
As history has shown repeatedly, lack of employment opportunities and lay offs can causes serious social problems and lead to poor law and order conditions. India is currently the world’s youngest country with about half of the population below the age of 25 years.
Modi government can not afford to lose any further time in tackling the situation. It has taken some steps but there doesn’t seem to be a focused approach. Finance minister Nirmala Sitharaman’s track record in dealing with the country’s economy has also not been encouraging. The government must not shy away from consulting experts and in accepting advise from them and business leaders. We are facing a national crisis and need to formulate an effective response.
(The author, a freelance journalist, is a former Resident Editor of Indian Express, Chandigarh, and reported on the political developments in Jammu and Kashmir, North-Eastern India, Gujarat, Himachal Pradesh, Haryana and Punjab in his long, illustrious career.)
5 Trillion Economy: GDP growth may come down to 4.2%
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