Honey, I Shrunk The Economy

The rot in the vitals of the Indian economy is much deeper than what is discernible from outside. And the government’s policies are squarely to blame.

Ministers of the BJP government are at pains to underscore that the fundamentals of the Indian economy are “strong”. investment, consumption, savings and employment constitute an economy’s fundamentals. in India’s case, all these parameters are signalling grave distress. A combination of poor policy choices with the continuous and systematic dismantling of India’s institutions has led to the current impasse. the slow meltdown of the Indian economy is a project that has now been in the works for five years.

India’s nominal GDP is $2.61 trillion and is growing at 5 percent—the slowest pace of growth in six years. the index of industrial Production of the manufacturing sector grew by 1.2 percent in June 2019, as compared to 6.9 percent in June 2018. the manufacturing sector’s growth during April-June 2019 was 3.1 percent as compared to 5.1 percent during the corresponding period of the previous year.

In July 2019, the production of eight core industries grew by 2.1 percent as compared to a growth of 7.3 percent recorded in July 2018. Production of eight core industries grew by 3 percent in April-July 2019 as compared to 5.9 percent in the corresponding period the previous year.

Consumption is an important indicator of the health of any economy. external consumption, or exports, had peaked in 2013-2014 at $314.88 billion, but reduced to $262.2 billion before recovering partially to $303.3 billion in 2017. Merchandise exports and imports (in Us$ terms) declined by 0.4 percent and 3.6 percent respectively in April-July 2019. in that period, oil imports declined by 5.7 percent and non-oil imports by 2.9 percent.

This has impacted India’s balance of payments. India’s current account deficit (CAD) was 2.1 percent of GDP (Us$ 57.2 billion) in 2018-19 as compared to 1.8 percent of GDP (Us$ 48.7 billion) in 2017-18. the widening of the CAD was primarily on account of higher trade deficit.