India's economic growth slumped to an over six-year low of
6.5% due to slower consumer demand and
private investment amid deteriorating global environment, prompting many global
agencies to cut India's GDP growth for the year 2019-20. In October19 monetary
policy review RBI had sharply cut it’s economic growth projection for this
fiscal to 6.1% from earlier of 6.9%.
People need to have cash in their hands. However, record-high
unemployment has severely affected the supply-demand ratio in India. This is
key reason behind the economic slowdown. The government has to come up with a
plan to increase wage growth; which would be possible only by injecting more
liquidity into the system. Despite the bank mergers and re-capitalization,
Indian banks are far from recovery, with non-performing assets (NPA) at
staggering Rs 8 lac crore!
The NBFCs which are key lender to Micro, Small & Medium
Enterprises continue to face liquidity crunch and show no signs of recovery in
the near future too. To tackle the slowdown, revival of MSMEs are needed,
which would create employment across sectors. It is high time the government
focuses on fixing the liquidity crisis, which has choked lending to most MSMEs,
and reducing the tax burden on individuals and companies.
Indian economy slowed in 2017 due to
"Demonetisation" and introduction of “GST”. Nearly 60% of India's GDP
is driven by domestic private consumption, government spending, investments,
and exports. Merchandise exports dipped 1.1% in October19 from the same month a
year earlier after dropping 6.6% in September’19, amounting to a total value of
USD 26.4 billion in October’19. Consumer
prices rose 1.09% compared to the previous month, up from the 0.55% increase in
September19. The increase was largely due to more expensive food and beverages,
which, as a category account for over half of the weight of India’s consumer
price basket.
Since India has a vast informal economy, barely 2% of Indians
pay income taxes. According to World Bank, to achieve sustainable economic
development India must focus on infrastructure, agricultural and rural
development, removal of land and labour regulations, financial inclusion, spur
private investment and exports, education and public health, public sector
reform-selling “Navratnas” by way of disinvestments is not the only response.
Nearly 70% of India's population is rural whose primary
source of livelihood is agriculture, and contributes about 50% of India's GDP.
Govt. should focus on this sector, which has potential to become the major
exporter of food products of the world.
Despite India holding world's seventh-largest
foreign-exchange reserves worth $440 billion; suffers from high national debt
with 68% of GDP, while its fiscal deficit
as per 2019 CAG report is 5.85% of GDP!
In the times like these business enterprises have to create
long lasting anchors to remain healthy going concerns. We have to eject out of
non-profitable activities, stay focused only on the core ones and identify
the areas where we can go sleek in the cost. We have to build businesses which
are rationalized and vibrant in
structure, low on Opex- operate on low ‘cost to income ratio’, less manpower
intensive and more Tech Driven, which would build efficiencies and
effectiveness at enterprise level. It’s time to relook our products, processes,
sales and marketing plans to ensure that they bring maximum revenue with
reduced cost.
As Warren Buffet says- ‘If you buy things you do not need,
soon you will have to sell things you need’.
Therefore, as individuals we have to save every penny by restricting our
needs and certainly curtailing our wants. In the times like these, do not
lend/borrow, stay sufficiently covered with life, health and general insurances,
create alternative sources of incomes via. rentals on our properties, investing
in the financial instruments which are well sanitized against repayment
defaults, diversified and offering decent ROIs.
The long-term growth perspective of the Indian economy
remains promising due to its young population and corresponding low dependency
ratio, healthy savings and investment rates, and it’s increasing integration
into the global economy. The government has recently announced a slew of
measures, including cut in corporate tax rate, capital infusion into public
sector banks, setting up Rs 25,000 crore fund to boost realty sector, among
others, to boost the economy.
However, for India to become a 5 Trillion $ economy; we would
require structural changes, and policy decisions which are in concurrence with
the demands of the industry to fuel growth, and are also in consonance with the
inputs from economists, pegged at global standards. Note, we still do not have any corporate
which features in top 100 list of Fortune 500 or in Forbes; so lot of work
still in hand at the level of government, corporate and every citizen.
Go conservative till the time changes for better.
