Normally. an economy is run by four engines: private investment, public spending (government investment), internal consumption (goods and services ) and external consumption (exports of goods and services). And if one of growrh engine fails, its speed is broken. This is whats happening in ndian economy.
As long as the government was pumping resources into infrastructure. public investment was growing. And despite GST and DeMo blues, some parts of the domestic consumption economy such as auto, consumer durables and FMCG were growing at 15-16 per cent. That was enough to drive the growth.
But recent indicators suggest that domestic consumption is dipping gradually. Ministry of Finance in its latest monthly report has admitted that he declining growth of private consumption has affected the growth. tepid increase in fixed investment, and muted exports, the Ministry of Finance in its latest monthly report has said. During last quarter of the financial year 2019, the declined is reflected in the drop of growth of two-wheeler sales. The Central Statistics Office (CSO) in its Q3 national account data too had revised a downward trend in the growth estimate for FY 19 to 7 per cent from 7.2 per cent, which is the lowest in the past five years.
The continuing decline in the sales of automobiles has had its impact on the jobs. A rough estimate by the Automotive Component Manufacturers Association of India has put the figure of job losses in this sector at around 10-15%. So far, those hired on contractual basis, who form a major portion of the workforce have had to bear the brunt, reports indicate. In terms of numbers, some 8 to 10 lakh workers might have lost their jobs, according to a report.
Not only auto sector, overall factory output growth slowed to 2 per cent in June 2019, as compared to 7 per cent in June 2018. The Index of Industrial Production refers to growth rates in different industry groups to ascertain their economic health.Manufacturing sector slowed down to 1.2 per cent, as against 6.9 per cent in June 2018. Mining sector growth rate was at 1.6 per cent, as against 6.5 per cent in June 2018. However, power generation fared comparatively better with growth rate of 8.2 per cent in comparison to 8.5 per cent a year ago.
For the first time since May, 2018, country’s services sector activity contracted in June ( July data awaited) due to weak sales and competitive pressures.
The other two engines-exports and private investment0 are not doing well for last few years, especially exports.India's exports which had peaked to $314.88 billion in 2013-14, had declined to as low as $262.2 billion in 2015-16 before recovering partially to $303.3 billion in 2017-18. merchandise trade growth, Export growth hit a 41-month low in June as poor performance plagued all major foreign exchange earners including petroleum oil, gems and jewellery, and engineering goods. Imports also dipped by 9.06 per cent, a 34-month low in June. In June, outbound trade contracted by a significant 9.7 per cent, after rising by 3.93 per cent in May, according to Commerce and Industry Ministry data.The government blames this on overwhelming global trading conditions.
The fourth poorly performing engine is the private investment. During 2018-19 new investment proposals weny down to barely Rs 9.5 lakh crore, the lowest in 14 years since 2004-05. Its lower than an average of Rs 25 lakh crore in the period 2006-07 to 2010-11. Private investment usually accounts for two-thirds of total investment in the economy, according to CMIE. Since 2014, its share had fallen drastically to just 47 per cent by 2018-19, indicating that the economic growth was being dragged along primarily by public expenditure.
No economy can run on a single engine, especially when that too is sputtering.
Ehe economic penexea to recover from a slowdown is simple as deployed again and again by US, China and Germany with amazing success. The government has to increase the public incestment and loads of it for years . Public Expenditure through infrastructure building revived the US through the Great Recession. Done over a long period of time, it has a contagious effect on growth. India meed to do that with fill force.