{"id":35325,"date":"2018-10-31T16:26:07","date_gmt":"2018-10-31T10:56:07","guid":{"rendered":"https:\/\/blog.forumias.com\/?p=35325"},"modified":"2018-10-31T16:26:07","modified_gmt":"2018-10-31T10:56:07","slug":"economy-outlook-still-cloudy","status":"publish","type":"post","link":"https:\/\/forumias.com\/blog\/economy-outlook-still-cloudy\/","title":{"rendered":"Economy outlook still cloudy:\u00a0"},"content":{"rendered":"<p><a style=\"font-size: 1rem;\" href=\"http:\/\/www.thehindu.com\/todays-paper\/tp-opinion\/economy-outlook-still-cloudy\/article19617083.ece\">Economy outlook still cloudy<\/a><span style=\"font-size: 1rem;\">:\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\"><strong>Context<\/strong>:<\/span><\/p>\n<p><span style=\"font-weight: 400;\">The government move to published economic data for the April to June quarter of this year needs a look<\/span><\/p>\n<p><strong>Introduction:<\/strong><\/p>\n<ul>\n<li>\u00a0The real growth of GDP, after removing the impact of inflation, was only 5.7%, much lower than expected.<\/li>\n<li>For the past six consecutive quarters, the growth rate has gone down steadily, from 9.2% at the end of the quarter ending March 2016, to 7.9%, 7.5%, 7.0%,, 6.1% and now 5.7% at the end of the June quarter.<\/li>\n<li>Inflation has been moderate, and touched a low of 1.5% recently.<\/li>\n<li>Both trade and fiscal deficit are moderate and manageable.<\/li>\n<li>Oil prices, the ban of the Indian economy, have been stable \u00a0and comfortably low.<\/li>\n<\/ul>\n<p><strong>Background<\/strong><\/p>\n<p><span style=\"font-weight: 400;\">According to the Economic Survey, if the growth rate will be below 7% this fiscal year. That would be a potential loss of 1% growth. It also signifies millions of jobs not created.<\/span><\/p>\n<p><strong>Low manufacturing sector:<\/strong><\/p>\n<ul>\n<li><span style=\"font-weight: 400;\"> \u00a0<\/span><span style=\"font-weight: 400;\">The manufacturing growth stood at 1.2% is the lowest in the past five years.<\/span><\/li>\n<li><span style=\"font-weight: 400;\">The decline was caused supposedly by the suspension of manufacturing activity prior to the rollout of the Goods and Services Tax(GST) in July, and consequent de-stocking of inventory.<\/span><\/li>\n<li><span style=\"font-weight: 400;\">A State Bank of India report said that credit growth for the year ending last March was the lowest in 63 years.<\/span><\/li>\n<\/ul>\n<p><strong>GDP measure:<\/strong><\/p>\n<p><strong>The GDP is measured in two different ways:<\/strong><\/p>\n<p><span style=\"font-weight: 400;\">1-By looking at the production side<\/span><\/p>\n<p><span style=\"font-weight: 400;\">2-By looking at the spending side.<\/span><\/p>\n<p><strong>Problems:<\/strong><\/p>\n<ul>\n<li><span style=\"font-weight: 400;\"> \u00a0<\/span><span style=\"font-weight: 400;\">The capital formation is steadily declining for several years.<\/span><\/li>\n<li><span style=\"font-weight: 400;\"> \u00a0<\/span><span style=\"font-weight: 400;\">Private sector investment has practically come to a standstill.<\/span><\/li>\n<li><span style=\"font-weight: 400;\">Despite the push for \u2018Make-in-India\u2019, reforms for improving \u2018Ease of Doing Business\u2019 , increased access to electricity, improvement in infrastructure and private investment are not picking up<\/span><\/li>\n<li><span style=\"font-weight: 400;\">The corporate sector and banks have been affected by the twin balance sheet squeeze wherein corporates are over-leveraged, and banks have mounting bad loans.<\/span><\/li>\n<\/ul>\n<p><strong>Challenges:<\/strong><\/p>\n<ul>\n<li><span style=\"font-weight: 400;\">The most significant challenge to the domestic industry is the ever-strengthening rupee.<\/span><\/li>\n<li><span style=\"font-weight: 400;\">Since January the rupee is 7% stronger compared to the American dollar.<\/span><\/li>\n<li><span style=\"font-weight: 400;\">The rupee is stronger than its Asian peer currencies too, including China, the Phillippines, Indonesia and Thailand.<\/span><\/li>\n<li><span style=\"font-weight: 400;\">Our exports are barely up 12% since January, whereas imports are up more than 30%.<\/span><\/li>\n<li><span style=\"font-weight: 400;\">The GST regime has given an extra advantage to importer traders since the countervailing duty that they now pay as GST can be offset against other taxes, a concession which was not available earlier.<\/span><\/li>\n<li><span style=\"font-weight: 400;\">India is a net importing country; our exchange rate should be stronger.<\/span><\/li>\n<li><span style=\"font-weight: 400;\">If gold imports is removed, a large part of which is not for consumption but as store of value, then our trade deficit will be much smaller.<\/span><\/li>\n<li><span style=\"font-weight: 400;\">The rupee needs to be weakened or else it will hurt domestic manufacturing even more.<\/span><\/li>\n<\/ul>\n<p><strong>Impacts of Demonetisation:<\/strong><\/p>\n<ul>\n<li><span style=\"font-weight: 400;\">Half of the last fiscal year, that is prior to demonetization, recorded a real growth of 7.7%.<\/span><\/li>\n<li><span style=\"font-weight: 400;\">The current April to June quarter\u2019s growth is 5.7% certainly includes the negative impact on the informal and rural economy.<\/span><\/li>\n<li><span style=\"font-weight: 400;\"> \u00a0<\/span><span style=\"font-weight: 400;\">Investment and consumption spending were postponed due to cash shortage.<\/span><\/li>\n<li><span style=\"font-weight: 400;\">The Economic Survey warns about the deflationary impact of low agricultural prices.<\/span><\/li>\n<li><span style=\"font-weight: 400;\">The agriculture sector GDP shows nominal GDP growth to be lower than real DGP<\/span><\/li>\n<\/ul>\n<p><strong>Solutions:<\/strong><\/p>\n<ul>\n<li><span style=\"font-weight: 400;\">The growth in GDP can be traced to the growth and vigour of each of these components.<\/span><\/li>\n<li><span style=\"font-weight: 400;\">Investment, which is between 30 and 35% of total pie, needs to grow at least in double digits.<\/span><\/li>\n<li><span style=\"font-weight: 400;\">Investment in future capacity creates GDP growth of the future. It needs to be led by the private sector.<\/span><\/li>\n<li><span style=\"font-weight: 400;\">Presently, that component is barely growing at 1.5%.<\/span><\/li>\n<li><span style=\"font-weight: 400;\">Initiatives such as Housing For All, Smart Cities and Digital India give room for huge opportunities for private entrepreneurs.<\/span><\/li>\n<\/ul>\n<p><strong>Conclusion:<\/strong><\/p>\n<ul>\n<li><span style=\"font-weight: 400;\">The big structural reforms of GST, the new insolvency code, the new monetary framework and Aadhaar linkage are measures which will show desired results in long run.<\/span><\/li>\n<\/ul>\n","protected":false},"excerpt":{"rendered":"<p>Economy outlook still cloudy:\u00a0 Context: The government move to published economic data for the April to June quarter of this year needs a look Introduction: \u00a0The real growth of GDP, after removing the impact of inflation, was only 5.7%, much lower than expected. For the past six consecutive quarters, the growth rate has gone down&hellip; <a class=\"more-link\" href=\"https:\/\/forumias.com\/blog\/economy-outlook-still-cloudy\/\">Continue reading <span class=\"screen-reader-text\">Economy outlook still cloudy:\u00a0<\/span><\/a><\/p>\n","protected":false},"author":61,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"jetpack_post_was_ever_published":false,"footnotes":""},"categories":[555],"tags":[],"class_list":["post-35325","post","type-post","status-publish","format-standard","hentry","category-test-1","entry"],"jetpack_featured_media_url":"","views":{"total":0,"cached_at":"","cached_date":1704840174},"jetpack_sharing_enabled":true,"_links":{"self":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts\/35325","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/users\/61"}],"replies":[{"embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/comments?post=35325"}],"version-history":[{"count":0,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts\/35325\/revisions"}],"wp:attachment":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/media?parent=35325"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/categories?post=35325"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/tags?post=35325"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}