publive-image

Currently, the Indian economy is facing a downfall in its growth. According to the report, in the first quarter of this FY19, economic growth has slipped to a 6-year low of 5%. The manufacturing sector expanded by just 0.6%, while agriculture grew 2% and construction 5%. This cause the inflation-adjusted GDP growth has slipped from 7.2% in the previous year to 6.8% in 2018-19. Corporate results in each of the quarters reflect a slowdown in profit growth across all sectors, restraining the industry’s capacity to modernise or expand.

Last week, Finance Minister Nirmala Sitharaman said in a meeting that the government is continuously assessing the difficulties faced by industry to formulate timely and to appropriate responses.

Briefing to press after meeting tax officials, finance minister says, “We are making every effort to ensure that the challenges faced by various industries are understood well and we extend all support so that all industries get the stimulus to grow." She states tax collection targets were given to officials after due consideration and, if at all there was any shortfall, it will not affect social sector spending.

Additionally, the minister said the federal indirect tax body, the GST Council, will take a call on GST rate cuts, which the industry has been asking for. Meanwhile, the FM also asked central public sector enterprises (CPSEs) and infrastructure ministries to speed up investment to bolster capital expenditure in a sagging economy.

The meeting was jointly chaired by economic affairs secretary Atanu Chakraborty and expenditure secretary G.C. Murmu. As per the finance ministry statement, the capital expenditure plans of CPSEs and ministries were reviewed, and they were asked to adhere to the expenditure plan for the financial year.

The CPSEs and ministries were also asked to monitor the progress of release of payments for procurements and other contracts without delay to infuse liquidity in a timebound manner, as well as to resolve unresolved payments which may have been held up on account of disputes.

The Slowdown in Economic Growth

The data showed that this economic slowdown is reflecting on job creation. Unemployment hit a four-decade high of 6.1% in 2017-18 of which 7.8% of all employable urban youth were jobless, while the figure for rural India was 5.3%. Meanwhile, the working-age population, those above the age of 15, is expanding by 13 million a month.

However, India needs to generate 18.6 million jobs a year to make sure that the demographic dividend is not frittered away. Though taking the current redundancy level in the job, the economy will have to create 8.1 million jobs a year, but the numbers are not very encouraging.

The Government’s Economic Booster Package 

Taking this economic downfall, the government last month announced measures to revive economic growth and markets including the withdrawal of higher taxes for foreign portfolio investors (FPIs) and said it would release funds for bank recapitalisation upfront. However, the government hopes the new measures will improve the sentiment leading to higher private investment.