Economic slowdown is here to stay? Not if the government springs more reforms

Equity Right Economic Slowdown

 Economic slowdown is here to stay? Not if the government springs more reforms
With the economy under pressure and no visible indicators to boost growth, economists see the slowdown to spillover into the upcoming financial year. Industries ranging from industrial productions, exports, corporate sales to the non-food sector has gone down substantially in the growth index.

Economists statement on the economy

Economists were hopeful that the economy will rebound by the second quarter with the government impetus. However, as reported the GDP has fallen down to 5 %. Which is a six-year low in India’s new GDP computation. Meanwhile the Government has come forward to support various sectors to push the numbers up.
According to the Reserve Bank Of India (RBI) data consumer’s confidence is at six years low and has fueled the economic slowdown. Economists believe the slowdown will not be taking a u-turn any time sooner despite the efforts of the Government and FM.

The recent move by the Government to cut corporate tax will  bring in private investments for a medium-term period. Investors are waiting for the Government to set up reforms for  manufacturing sectors like Automobile.

Economists added that the fall in rural demands and consumption has contributed to the slowdown of the economy.

Government impetus to combat the slowdown

The rural aid scheme formulated by the current Government as PM-Kisan has its budget cut for the next financial year from ₹ 75000 crore to ₹ 20000 crore for various reasons. The rural economy would not pick up any time sooner if the Government does not address the problems through several existing scheme namely NREGA, PM-Kisan and improving rural connectivity and micro-irrigation.
The Banking sector is under pressure as some NBFC’s are suffering from Asset and Liability Mismanagement, resulting in the higher risk for Banks to finance this sector. Small and medium enterprises (SMEs) in both rural and urban India who used to get the funding from these NBFCs are invariably struggling . Case to highlight here is the demise of DHFL or Diwan Housing Finance Ltd.

According to some economists, the recent steps taken by the finance ministry to support the MSME’s, NBFC’s and exports will be lead to provide positive impetus to the economy, in sequential manner.

Real Estate Consumption story

Data collected and available with various agencies show, there are 1.3 million unsold homes currently with the total value of Rs. 9.4 Trillion. Moreover, this has resulted in real estate firms lacking sufficient funds and revenue stream to repay current debt obligations taken to complete the projects. Shortage of funds are also adding up to many unfinished projects which are  under construction. While home buyers are reluctant to buy unfinished homes adding more stress to realty developers.

Global rating firm Moody’s has cut India’s rating outlook from ‘stable’ to ‘negative’ citing increasing risks to economic growth and a rise in the debt burden being the key reasons. Meanwhile, the announcement affected the bourses  as markets are looking at a foreign outflow of investment. The cut in ratings came two years after the agency upgraded India’s sovereign ratings.

So unless the government comes up with some strong measures to bolster the economy and various sectors which are facing growth slowdown, we are bracing for the worsening economic situation even in the next financial year.

Economic slowdown is here to stay? Not if the government springs more reforms


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