Fitch ratings (a US based credit rating agency) has recently released a report, slashing INDIA's GDP forecast for 2020-21 at a mere 2.0%, down from previous estimate of 5.1% . The report suggested that India's GDP will be at a 30-year low which was recorded in pre-liberalisation(LPG reforms) era. It is obvious that this kind of report can raise eyebrows of a normal Indian, and one must be thinking that is it really possible, that India's GDP will plummet to such a low level.
Checking India's Economy current trends :-
India has been facing a crunch in its private consumption(consumption by people and India Inc.) and the demand is low in many areas be it automobile(demand slides as much as 50% acc. to current reports), or FMCGs, this trend has been excerbated by the pandemic and a Nationwide lockdown for 21-days (A normal person don't want to spend money in this time to save more, thinking of encountering a more stressful situation in near future). Adding to this situation, the supply of essential commodities are also suffering due to broke-in of supply-chain, closing-up of industries, MSMEs and other important sectors, making both supply-side and demand-side of the economy plummeting down further.
Apart from this, due to global fears during this time, foreign portfolio investors(FPIs) are extracting money from Indian capital markets (a riskier market) and investing them elsewhere or saving them . This has made our financial market fall. The weakening of Indian Rupees vis-a-vis US Dollars to an all time low, has made Indian market more weaker.
Adding to these woes are, structural related issues of Indian Economy which are highlighted by many Economist, eminent personalities, and think-tanks, to the GOI as well as the plight of banking sector, with increasing NPAs , is an another problem very well known to us.
Lockdown and its-effect?
GOI decided on 24 march to issue a complete lockdown of India for 21-days confining 1.3 bn people in their homes. Though, the lockdown seems to be only measure to curb the problem and get away with mass-infection of the pandemic, this decision has put India into a dilemma, where hundreds of thousands of migrant workers are leaving for their hometown with no possibilty of earning income in urban areas. The problem of daily wage workers in informal sector is becoming a nightmare for GOI, from defying the social-distancing norms to the problem of providing basic amenities to them, all these are matter of great concern. The lockdown has halted the activites of MSMEs and Industrial sector abruptly. Also, panic buying by the people has inflated the rates of essential commodities and increased the prospect of decresed supply of essential items in the future.
With global lockdown of countries around the world, mainly Aviation sector and Tourism sector is facing the crunch in this highly globalised world. Stopping of imported items is making India face a situation of shortage in various areas.
The GOI undoubtedly, is trying to pull the economy out of this phase for which it has provided a stimulus of ₹1.7 Lakh crores, mainly for workers in informal sector, but the Industrial sector of India is also in a dire need of stimulus package, as pointed out by CII (confideration of Indian Industry, apex body of Industrial sector) which asked for at least ₹2 trillion stimulus package for Industries from GOI which is facing the problem of fiscal prudence. Considering all this, we can say that the amount provided by government is inadequate for reviving the economy or providing the adequate liquidity to it to survive this phase. Relaxing norms for possible insolvency is another step taken by GOI considering the phase of lockdown. RBI went a step further by taking a bold step of decreasing repo-rate, reverse repo-rate and giving option to delay the payment of EMIs on loans to bank cutomers, these are the moves to provide liquidity to people in short and Economy at large.
One thing is clear to us as of now that, India is indeed in a very peculiar situation of fighting a pandemic on one hand and trying to revive its already faltering Economy on the other. Though, one thing is in India's advantage, low-price of global crude oil, which is providing surplus to GOI, to some extent. Yet, we cannot rely only on these measures, much more is to come in the upcoming times, and the preparedness of GOI on medical and economic fronts, and the support and following-up on the rules by the people will decide, on what course India will travel.
With global lockdown of countries around the world, mainly Aviation sector and Tourism sector is facing the crunch in this highly globalised world. Stopping of imported items is making India face a situation of shortage in various areas.
The GOI undoubtedly, is trying to pull the economy out of this phase for which it has provided a stimulus of ₹1.7 Lakh crores, mainly for workers in informal sector, but the Industrial sector of India is also in a dire need of stimulus package, as pointed out by CII (confideration of Indian Industry, apex body of Industrial sector) which asked for at least ₹2 trillion stimulus package for Industries from GOI which is facing the problem of fiscal prudence. Considering all this, we can say that the amount provided by government is inadequate for reviving the economy or providing the adequate liquidity to it to survive this phase. Relaxing norms for possible insolvency is another step taken by GOI considering the phase of lockdown. RBI went a step further by taking a bold step of decreasing repo-rate, reverse repo-rate and giving option to delay the payment of EMIs on loans to bank cutomers, these are the moves to provide liquidity to people in short and Economy at large.
One thing is clear to us as of now that, India is indeed in a very peculiar situation of fighting a pandemic on one hand and trying to revive its already faltering Economy on the other. Though, one thing is in India's advantage, low-price of global crude oil, which is providing surplus to GOI, to some extent. Yet, we cannot rely only on these measures, much more is to come in the upcoming times, and the preparedness of GOI on medical and economic fronts, and the support and following-up on the rules by the people will decide, on what course India will travel.
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