Reuters Survey Predicts Indian Economy to Slow Down Shortly
Per the report, should the forecasts hold, India is likely to post its slowest growth in five quarters.
Ahead of one of the most crucial elections of our time — the 2019 Lok Sabha Polls — the Indian economy is reportedly losing momentum. A Reuters survey of economists forecasts that growth slipped to 6.9 per cent annually in the October-December quarter.
As per the Reuters report by Manoj Kumar, should the forecasts hold, India is likely to post its slowest growth in five quarters. The timing does not work for Prime Minister Narendra Modi and the Bharatiya Janata Party (BJP) which faces some anti-incumbency in the upcoming polls. The report reads: “The current growth numbers may look respectable, but Modi faces a criticism that he has not done enough for the manufacturing sector and create enough jobs for millions of youth entering the jobs market every month.”
Per the story, economists attributed weaker domestic and external demand to the less below-seven per cent growth. As per A Prasanna, chief economist at ICICI Securities Primary Dealership, the economic growth in December quarter could fall to as low as 6.4 per cent. The report added that while direct cash transfers to farmers — the Pradhan Mantri Kisan Samman Nidhi — could marginally help growth rates, but would ultimately increase the government’s debt.
Economic growth could suffer a possible slowdown in state spending in the two months — March and April — before the election, said the report, adding that India has underperformed in the manufacturing sector even though it emerged as the world’s sixth-biggest auto manufacturer and despite expanding production of smartphones. In fact, manufacturing GDP has reportedly risen only by 1.5 per cent in the last three years. This comes in the wake of investors complaining about higher taxes, lack of efficient infrastructure and regulatory red tape.
Furthermore, year-on-year growth in the industrial output in November and December 2018 was reportedly low at 0.3 per cent and 2.4 per cent, compared to the average growth of 5.7 per cent in the preceding seven months of 2018-19.
The report further added that inflow of foreign direct investment (FDI) had dropped seven per cent to $33.5 billion in the nine months between April and December 2018. This, it suggests, reflects investors’ concerns that PM Modi’s business-friendly government faces some tough contest.