Profile
Settings
Refer your friends
Sign out
According to the World Bank, India’s GDP has reduced in the last few years. India grew at an average of 7% each year from the early 1990s until the pandemic struck the country. When faced with a once-in-a-century epidemic, it’s easy to dismiss this as an anomaly with the hope that it will go away. However, it appears that the GDP data is not an outlier in this situation. India’s economy had been rapidly deteriorating even before the outbreak of the Covid-19 pandemic.
Unemployment
India’s unemployment rate has declined in recent years. However, unemployment is a major challenge to be faced by the government. A lack of economic development means that unemployment is likely to be the government’s main focus for the rest of its term.
The economic decline has been accelerated by a decrease in employment and wage levels. As a result of an increase in the number of provident fund accounts, the government cited an increase in seasonal employment of roughly 20 million jobs. However, there is a problem at work. Many automakers have cut over 350,000 jobs, while steel mills like Tata Steel and other significant corporations are running at less than half their normal capacity.
During a recent recruiting drive for the Indian Railways, more than 25 lakh people applied, which paints a clearer picture of India’s unemployment situation. The government has vowed to create more jobs in the railways and judiciary. Even if our average population is 28 years old, we can’t take advantage of this demographic dividend because there isn’t enough employment for everyone. According to a research report, the economic downturn has impacted an estimated 60 lakh jobs in the country’s construction and real estate sectors.
Inflation
The retail inflation rate in India has been consistently high since the fourth quarter of 2019. Even if COVID-19’s 2020 lockdown caused demand destruction, the inflationary rise would not be extinguished. Few comparable advanced and emerging market nations, including India, had an inflation trend over or near the RBI’s benchmark since the end of 2019. Inflation is a major concern for India going forward.
Fiscal budget
An indicator of a government’s ability to pay its bills is known as its fiscal deficit. It measures how much money it must borrow from the financial markets to meet its obligations. Excessive borrowing usually has many drawbacks. “Crowding out of the private sector” is a term used to describe the effect of government borrowing on the availability of cash for private enterprises to borrow. This also raises the interest rate on such loans.
New borrowings add to the government’s debt burden. Higher debt levels mean that more of the government’s taxes will be used to pay back the debts it has taken out in the past. Higher amounts of debt also suggest higher taxes.
Indian rupee vs. US dollar
When it comes to gauging the strength of a country’s economy, the value of its currency against the US dollar is a reliable indicator. When the government came into power in 2014, a US dollar was worth Rs 59. It’s now closer to Rs 75. Because the Indian currency has lost purchasing power, the rupee has fallen in value.
Foreign Relations
The deterioration of US-China trade relations has harmed businesses that export and produce goods to China. In its most recent monetary policy statement, the Reserve Bank of India (RBI) warned that this factor would weigh on the Indian economy in the coming months. However, it’s also important to note that this isn’t the main cause of the economy’s slowdown.
Demonetisation scheme
Despite the government’s one-time cash-cutting exercise, India’s growth took a significant hit. According to experts, the recession in India’s economy began as a result of a decline in farmers’ incomes.
The decline in consumer demand
The severe decline in consumer demand, which virtually all major businesses have observed, is one of the primary causes of the present slowdown. This time around, it was clear that India remains a rural economy. Initially, the slowdown in rural economic activity affected tractor and fertiliser makers.
Introduction of GST
Soon, everyone was affected, and the rural market’s sales of fast-moving consumer products were also affected. These are markets like small towns where consumption has gone down dramatically. After demonetization, the government implemented several other tax measures, including the Goods and Services Tax (GST).
The slowdown in the Real-Estate market
The slowdown in the building and real estate industries has had the most significant impact on India’s GDP of all the factors. It was the worst four years for the construction and real estate sector, which accounts for 40% of all jobs. According to experts, less money will be allocated to housing projects, including affordable housing, than anticipated.
Final Words
For the last few years, GDP growth has been slower than the administration had claimed. Demonetization and the hastily introduced Goods and Services Tax (GST) rippled through an economy already grappling with enormous bad debts in the banking system, leading to a low GDP growth rate.
