India has slipped to seventh position in the global GDP rankings in 2018 mainly on account of currency fluctuation and slow down in the growth, but India still remains the fastest-growing major economy in the world, although growth is estimated to slow to 7% in the current fiscal year that ends in March. China is expected to face a sharper slowdown due to the ongoing tariff war with the US.
Last month, research firm IHS Markit had said that India will overtake the UK as the fifth largest economy in the world in 2019 and is likely to shoot past Japan to emerge as the third-largest economy by 2025.
The government has unveiled a plan to emerge as a $5 trillion economy by 2024-25 and the Economic survey for 2018-19 has said that the country needs to sustain a real GDP growth rate of 8% to achieve the goal.
While growth is expected to be in the 7% range in the current fiscal year, most economists and multilateral agencies expect it to gather momentum and push past over the 7%-mark next year as the impact of the measures unveiled by the government takes hold.
Modi 1 Government have definitely achieved the objective of “Antyodaya” for ensuring the benefit of Govt schemes reaches to the right person through DBT, Jan Dhan Bank and Aadhar. This only help Modi1 Government to come back with more confidence of people and therefore it is necessary to analyze the various factors affected for negative growth.
- Global Impact:
Most of the countries of the world are facing recessionary trend. China US Trade war had impacted global sentiments. Further, change US-India Trade Policy also had the impact, which has resulted substantial downfall in the export growth. Fortunately balance of payment was not so badly hit on account of reduced crude prices but now crude prices are going up and putting inflationary pressure of balance of payment.
- Fiscal Policy:
Modi 1 Government focused on inflation control, which has remains at 3.4 as against 9.4 in 2013-14, which has ensured interest rate remain hard. Repo rate remains at 6.25 and therefore, there was tight monitory conditions, which has also resulted in the negative growth. The combined fiscal deficit of centre & state was high even though it is reduced in 2018-19 to 3.3% of GDP than that of 3.5% of GDP in the year 2017-18.
- Mess in Financial Sector:
The mess in financial sector which was accumulated years together has come to surface NPA ratio in UPA II Term. The total NPA as a percentage of total loan is given below:
| Year | Percentage |
| 2014 | 11.2% |
| 2015 | 9.3% |
| 2016 | 7.5% |
| 2017 | 4.3% |
| 2018 | 3.8% |
Stress in NBFC is faster than public bank because of greater inter-connectedness to mutual funds, banks and corporate sectors. IL & FS Crises is the major example. Since, the mess was created by financial institution hand in gloves with corporate sectors have made position tighter. Fortunately Modi 1 Government have brought one of the best reforms in the form of Insolvency and Bankruptcy Code 2016, which has helped some recovery to the financial sectors.
- Jolt of Reforms:
Modi 1 Government has planned the action to eradicate the black money through which parallel economy was running and therefore one of the reform “Demonetization” happened in November 2016, which has given the severe blow to the consumption leading to the vicious cycle of job loss and lower income which laid to further drop in demand, which is the multiplier factor for affective the negative growth.
Another reform, albeit, one of the most desired and best reform, Goods & Service Tax had been implemented w.e.f. 1st July 2017. Unawareness, technology failure has created chaos in the minds of trade & industry and slow-down of the trade & industry was present during the revamp period. Exporters has badly suffered and even suffering now due to delay in refunds of exporters. While Modi 1 Govt has to be applauded for proactive steps to GST Council addressing the grievances of trade and industry but technology and bureaucracy was little bit slow and therefore exporters have badly suffered
- Agriculture:
Unfortunately, last two years there was a drought situation through out India. The measures to control inflationary trend resulted in controlling the food prices and thereby agriculture and economy was absolutely broken. India has seen substantial growth in number of suicides of the poor farmers. Purchasing power of farmers was badly affected and therefore rural wages also had negative growth. Since agricultural economy collapsed, purchasing power and consumption growth has reduced and hence there was multiplying impact for lowering the economy.
Government & Industries has to work hand in hand towards bringing India in the growth path to achieve 5 trillion economy by 2025.
The main reasons attributable to the slowdown is liquidated crunch and consumption market. Govt have announced in the budget their vision for the decade is to reach the $5 trillion economy through :
1. Building physical and social infrastructure;
2. Digital India reaching every sector of the economy;
3. Pollution free India with green Mother Earth and Blue Skies;
4. Make in India with particular emphasis on MSMEs, Start-ups, defence manufacturing, automobiles, electronics, fabs and batteries, and medical devices;
5. Water, water management, clean Rivers;
6. Blue Economy;
7. Space programmes, Gaganyan, Chandrayan and Satellite programmes;
8. Self-sufficiency and export of food-grains, pulses, oilseeds, fruits and vegetables;
9. Healthy society – Ayushman Bharat, well-nourished women &children. Safety of citizens;
10. Team India with Jan Bhagidari. Minimum Government Maximum Governance.
Though Govt. has stated in their Vision document & budget speech about taking Indian economy to $5 trillion, govt measures will not be sufficient. Trade & Industry, Financial sectors judiciary and all other stake holders have to play their own roles to achieve the vision. Some of the action plans are dotted down below :
- Financial Sectors:
a. Review of interest rate
b. Quick sanctioning of loans but only after proper scrutiny and checking of credentials and working of existing business through Management Audit, Cost Audit and not only rely on the Financial Audit.
c. Helping hand to first time failure of non-payment of instalment through proper experts including appointments of consultants.
d. Sincere attendance of Nominated Directors for review of functioning of the company to whom loans are granted
e. Bringing more liquidity in the market
f. Tight monitoring on NPAs and recoveries
g. Timely recovery through IBC mechanism
- Trade & Industry:
a. Creation of employment through subcontracting and outsourcing
b. Allowing work from home wherever possible without compromising on productivity and efficiency
c. Value Engineering Techniques by adopting technologies
d. Introduction of activity-based costing and Management Accounting practices
e. Participation in PPP Model of the Govt for creating infrastructure.
f. Promotion of export market
g. Substantial improvement in supply chain model and logistics solution
h. Revamping job potential sectors including MSME, Textile, Automobiles and Service Industry
- Agriculture & Food Processing:
a. Improving the value chain of agricultural produce
b. Improving the life and shelf life of agricultural produce
c. Adopting better practices of farming and agriculture and horticulture
d. Saving of water resources
e. Value Added product and marking arrangement thereof including fixation of MSP
- Service Sectors:
Service Sector is the major part of the GDP and service sector have great role to play for eliminating slow-down with technology and expertise.
- Judiciary :
a. Lot of cost is incurred on getting the justice and therefore open and transparent mechanism is necessary for better judiciary and reduction of litigation cost.
b. Number of litigations w.r.t. fiscal laws are only due to negative approach of bureaucrat and who doesn’t have any accountability for giving proper justice and therefore it is said that justice is received only at Higher Judiciary Authorities, since lower authorities do not want to take the proper decision for the best reason known to them.
c. Time, cost and energy is diverted during the process of litigation
Until all the stake holders work hand in hand with the govt and Govt with its bureaucracy work with the common objective with accountability and responsibility, such cyclic slow down can be turnaround to the major growth factor and the vision of Hon Prime Minister to make Indian Economy of $5 Trillion will not be difficult task.
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