India’s Economic Slowdown: How Long Will The Govt Live In Denial?

Pratik Chaudhary

5 years ago

It has been a few months since the news indicating that our economy needs significant measures and correction has been on our screens, but there are no signs of it yet. All those headlines you have been reading about our economy are much layered than what they appear to be.

Here Are A Few Alarming Signals:

1. Corporate Investment:

A report in The Hindu unravels shocking data points: corporate investments in annual tax filing for 2016-17 dropped to ₹4.2 lakh crore—which represents a drop of nearly 60% from the previous year (₹10.3 lakh crore).

Why does corporate investment matter? A simple comparison of these figures as a percentage point of our GDP proves how much it actually matters. In 2010-11, corporate investments were 15% of the GDP. That share gradually declined to 7% in 2015-16. But it collapsed to 2.7% during the year of demonetisation. Where are those people now who were singing the tunes of demonetization when it was implemented? It was a massive failure, and the government should be held entirely accountable for it even today.

2. Private Sector Income:

A Hindustan Times article shows that in 2018-19, private sector salaries recorded their worst growth in a decade, i.e. growth of 0.53% and the reason for this was that the sales of their employers which grew by just 3% as compared to a growth rate of 4.5% in the previous year. This includes all the news you have been hearing related to the private players, whether it is the auto manufacturers or the biscuit production companies. GST is an added evil that these private players face in their operations.

Why does this matter? Private salaries accounted for almost 13% of India’s Private Consumption in the past fiscal year. If one does not account for Private Consumption as an indicator of the health of our economy, then it is just uninformed and ignorant data analysis.

Also read: 6 Things You Should Know About India’s Quarterly Slowdown

3. Government Expenditure:

Even the government is strapped for cash. In 2018-19 GTR (Gross Tax Revenue) was 8.4% lower than what the government estimated in its budget for the same year. A miscalculation of the highest proportions.

Why does government expenditure matter? Without accurate appropriation of GTR, the Budget and its planned expenditure have to be rectified to start bringing corrective measures to avoid another such mishap. But that has not happened. And without proper corrective measures, the current expenditure rate will only increase the chaos by putting more weight on the tax slabs and increased commodity pricing.

The most significant indicators of any economy are Investment, Government Expenditure, and Private Sector Income. When all these indicators perform poorly, you can pretty much guarantee that everything looks downhill from here unless there’s proper intervention.

4. Value of Rupee:

The rupee has crashed to an eight-month low at ₹71.8 a dollar. And the markets continued to fall for the third day straight, which means that the situation might only get worse.

Nobody knows, including the professionals of the field, what the government will do to revive the economy, i.e. if it does anything.