Challenging goal

 When prime minister Narendra Modi declared that India was poised to become US$ 5 trillion economy by 2025, it was in itself a challenge as that meant the country’s economic growth rate ought to secure 9 percent average annual economic growth rate till then. No doubt India is among those nations whose economy was on the rise. There is every reason to expect India to be among the top five economic super powers in the coming decades. To make India progress there are many factors are considered so that the goal is achievable. However, the ground reality paints a different picture amid the high expectations. The economy has experienced a slowdown for some months. Among the factors was the midnight demonetisation surgical strike in November 2016 that removed 86% notes from the economy. As of June 2019, the current slowdown has lasted for 18 months – making it the longest episode since 2006. Most worrisome is about rise in unemployment. The National Sample Survey Office’s (NSSO) job survey for 2017-18 had shown a spike in the unemployment rate to over 6 per cent, a 45-year high. Unemployment in the country is at a four-decade-high. The figures released by the Ministry of Statistics and Program Implementation (MoSPI) on Friday pegged joblessness at 6.1 per cent. The report was released after a long delay. Manufacturing, mining and power generation sector saw their factory outputs decline in June 2019 by 1.2 per cent, 1.6 per cent and 8.2 per cent, as industrial production slowed. India’s factory output growth, measured by the Index of Industrial Production (IIP), slowed to 2 per cent in June 2019, as compared to 7 per cent in June 2018. The auto industry is expected to shed close to a million direct and indirect jobs due to a decline in vehicle sales. Consumption demand that accounts for two-thirds of India’s GDP is fast losing steam. Amid an economic slowdown, Moody’s Investors Service has cut India’s gross domestic product (GDP) growth rate to 6.2 per cent for calendar year 2019 against its earlier projection of 6.8 per cent. The rating agency scaled down India’s economic growth to 6.7 per cent for 2020, a cut of another 0.6 percentage points. In the two years since, Moody’s has downgraded its 2019 GDP growth forecast for India thrice – from 7.5% to 7.4% to 6.8% to 6.2%. Rajiv Kumar, the head of the government’s think tank Niti Aayog, recently claimed that the current slowdown was unprecedented in 70 years of independent India and called for immediate policy interventions in specific industries. In order to spur growth, the government took Rs.1.76 lakh crore from the RBI to increase money supply and government spending and making some decrease in taxation. To make matters worse, Finance Minister Nirmala Sitharaman presented her first budget recently with some ominous tax proposals that threatened foreign capital flows and dented investor confidence. It sparked criticism and Ms Sitharaman was forced to roll back many of her proposals. According to economists, government economic policies have been playing out against factors like high-interest rates, current scenario of NBFCs, tightening credit conditions and slowing external demands are collectively responsible for a slowdown in the Indian economy. Economists expect the Indian economy to slow down further. This will continue unless there is a major shift in economic policies.