*NEW DELHI: *The Indian economy has run into a rough patch, with growthdipping to the 5 per cent level in the year’s second quarter – the lowestover the last six years.
With a 3 per cent year-on-year drop, the latest falter has led to job cuts,holds on fresh hiring, rise in unemployment, factory shutdowns, andsuspension of production.
Annual GDP growth slumped to 6.8% in the 2018-19 fiscal year from 7.2% inthe previous fiscal year, making this the second successive year ofrecession. Economists argue that GDP growth in 2019-20 could be even lowerthan this year.
“The full-year growth is likely to be 6.5%, with normal monsoon rainsproviding some relief in the second half of the financial year,” AdityaManya, vice chairman of stockbroker Kalpataru Multiplier, told *AnadoluAgency*.
The economic slowdown is being felt across sectors including real estate,agriculture, automobile, manufacturing, and financial services.
There are clear signs that the automobile sector, which employs nearly 3.7million people and contributes 12% to the national economy is facing itsworst crisis in two decades with nearly 350,000 employees losing their jobsand nearly 300 showrooms and dealerships shutting down.
Industry association Society of Indian Automobile Manufacturers (SIAM) saidthat about a million jobs have been hit in the auto component manufacturingindustry after the onset of the slowdown.
According to SIAM, vehicle sales dropped 18.7% as of July 2019 to about1,825,148 units as the sales of cars, two-wheelers and tractors continue tofall. Hopes for a demand revival with the onset of the Onam and GaneshChaturthi festivals in September are also waning, with flooding in someimportant markets in Kerala, Maharashtra, and Karnataka.
Automobile manufacturing plants usually work overtime in the months ofAugust and September to meet the expected rise in demand during the festiveseason in India that starts with Ganesh Chaturthi and Durga Puja festivalsin September. Vehicle demand peaks during the major Hindu festivalsDussehra and Diwali that are celebrated during in the following months.However, with floods in some key markets, auto-makers are observingno-production days.
Satish Pandey, who works at a car showroom in Indore, said: “There is anatmosphere of uncertainty. Sales are not good. Some other automobileshowrooms in the city have seen retrenchments. We usually expect goodbonuses during the festive season. But this year the biggest bonus will benot losing the job.”
Real estate is another important sector suffering from huge slowdown asmany reports are now emerging from the ailing sector. Indian real estatestakeholders think any spike in sales for the rest of the year is unlikely.The overall economic slowdown has hit the real estate sector and isimpacting ancillary industries such as cement, steel, bricks, paints,furniture and electricity, besides rendering a huge workforce without a job.
Real estate research firm Liases Foras said the unsold housing inventory –such as residential houses, and apartments – overhang is as high as 42months. This means it will take 42 months or three-and-a-half years for thetotal unsold stock to clear up, while an efficient and sustainable markettypically maintains 8-12 months of housing inventory.
Subhash Saxena, a property developer in Lucknow, capital of the mostpopulous northern state of Uttar Pradesh, said the total unsold housinginventory in the country’s major cities had increased.
“This does not augur well for the real estate sector. With salesplummeting, builders don’t have money to finish under-constructionprojects,” he told *Anadolu Agency.*
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Farhan Khan, who owns a shop selling paints and hardware items in Aminabadarea of Lucknow, admitted the sales had dropped following a slowdown in thereal estate sector.
The fast-moving consumer goods (FMCG) companies have reported a drop involume growth in the April-June quarter following lower spending in urbancenters and tepid rural demand, which, in turn, means a decline in theavailability of funds in villages. The market research firm Nielsen hasrevised its prediction for the 2019 all-India FMCG growth to be in the9-10% range as slowing rural growth and lower urban household spending takea toll on FMCG sales. This is almost 4% lower than that that of 2018.
Asian Paints, India’s leading and Asia’s third largest paint company, saw alack of demand with a growth falling to 9% in the April-June quarter thisyear compared to 12% during the corresponding period of the previous year.
Manufacturing growth sank to a dismal rate of only 0.6% in the firstquarter (April-June 2019) of the current financial year (2019-20 or FY20)from 3.1% in the fourth quarter of 2018-19FY(January-March 2019).
Experts have been working on analyzing the possible factors for the currentslowdown.
India’s former Prime Minister Manmohan Singh has blamed the “all-roundmismanagement” by the government of Prime Minister Narendra Modi for thedownturn. Singh, like many other economists, said demonetization and Goodsand Services Tax (GST) law were to blame for the slowdown.
Clearly, our economy has not yet recovered from the blunders ofdemonetization and a hastily implemented GST, said the former primeminister, who is also a well-known economist and a former governor of theReserve Bank of India.
In November 2016, the government announced the demonetization of all500-rupee and 1,000-rupee-banknotes. The announcement of demonetization wasfollowed by prolonged cash shortages in the following months, which createdsignificant disruption throughout the economy.
The GST is an indirect tax levied on the supply of goods and services. Thislaw has replaced many indirect tax laws that previously existed in India.The GST came into effect on July 1, 2017.
In a released statement earlier this month, Singh raised concerns about theslowdown in the manufacturing sector, which grew at only 0.6% in the firstquarter of fiscal year compared to 12% in the same quarter last year.
“The state of the economy today is deeply worrying. The last quarter’s GDPgrowth rate of 5% signals that we are in the midst of a prolongedslowdown,” he said.
India’s Finance Minister Nirmala Sitharaman has announced a slew ofmeasures to boost the economy. Amid the deepening crisis in the autoindustry, Sitharaman announced several relief measures including deferringone-time registration fee, lifting the ban on the purchase of petrol anddiesel vehicles by government departments and allowing higher depreciation.-Anadolu Agency
