The GDP growth of the nation has fallen. Now, India now is no longer the world’s fastest growing nation. The nation’s economy has fallen below 6.5% of China. The manufacturing industry of the nation has suffered the worst blow this year. This sector has seen only 1.7%.
Tha opposition parties had to blame the famous demonetization that the government imposed in the last November. The government has blamed the disruption of a pre-GST era. These are considered to be a distraction. The largest problem which the nation has faced is the stagnation in export which continues for three years. No other country in the world has sustained the GDP growth of 7% without 15% export growth.
The demonetization has hit GDP between October and December and after that in the January and March quarter. But, due to its impact, the GDP has fallen further in the month between April and June. However, it should be mentioned that the GDP had slowed for three-quarter before the demonetization took place.
Among other factors, the export stagnation can be taken into account for the GDP getting slowed down.
Even though the government has defended the demonetization as a weapon to fight black money, they cannot deny the fact that the decision has hit the informal sectors. The current economy data are into formal production. It is expected that the growth figures fall to more dismal standard when the revised data would be made available in the month of next January.
The index for both the manufacturing and the services has dropped in July. The signs of recovery have been witnessed in August. The economists have blamed twin balance sheet. The demonetization has forced the banks to flush all the liquidity.
The domestic demand of the country is sluggish during this season while the international demand is unlimited. The problem of the sluggish economy might never go back to the 2000’s blooming day.
The exchange rate of the nation is not the only factor which is impacting exports. Productivity also matters in this regard. Cost of doing business matters as well. India has not succeeded to match competitors in this respect.
The government has worked hard to make business easy for the business owners. However, that scheme has not worked very well. Additionally, India has an interest rate which is way too high. The land cost of the country is not low either. All these areas need reformation on an urgent basis. A quick remedy could be low-interest rate and rupee depreciation. However, if the nation is opting for 8% GDP growth, it is important that productivity must grow.
