Current Economic Slowdown is just a teaser, the show is about to appear.

Bhavik Bamania
Bhavik Bamania
 -  4 mins read
Current Economic Slowdown is just a teaser, the show is about to appear.

We are heading towards a crash if the Government fails to take some preventive measures aren't taken now.

On last Friday (30th August), the data of GDP revealed that India’s growth rate was 5% for Q1 which waslowest for the last 25 quartersand was enough to create a nuisance in people’s mind, but this figures didn’t come dramatically, in fact somehow, we got the hint of this crash when we slipped to 7th position of growing economy.

Amidst of the opinions of many experts, mostly obviously criticizing in tone, hardly few of them actually taking interest in suggesting alternatives or measures that the Government should take to prevent further collapse, which in my view is quite visible. Yes, you read it right, if no further corrective measures aren’t taken by the Government we are going to see a crash in the economy in next quarters we will see a downfall by December onwards.

Economics is a subject which never gives outcomes on immediate effects even behind every immediate effects there are some hidden long-term outcomes which may be beneficial or not depends on what you are doing and circumstances. Similarly, the current situation which the entire world and India is facing is the outcome of both long-term detrimental yet short-term beneficial policies which were formulated during the 2008 recession period and some of wrong priorities and policies of the current government as well.

If I talk about the background when Dr. Manmohan Singh was our Prime Minister then and an economist, the global recession hit us and as a result to cope with the recession certain measures were taken. Like giving additional funds to banks to liquidate the frozen flow of cash in the market. As a result, the banks started to give loans on cheap rates and without much securities but the problem started to arise when the loan wasn’t returned to the bank and NPA started to creep up. However, as per initial assessment, the Modi Government is somewhat doing the same by providing the funds to banks but not via RBI via Government itself to ensure cashflow, the additional thing is they are doing mergers to prevent the further damage which for me is a band-aid solution since we won’t able to see any immediate effects at least for next 2–3 years. Additionally, we can expect the real picture of the banking sector of the damage done by haphazard policies during 2008 recessions, in words, we will see more bank fraud cases, that ever never reported by banks just”to showcase”the good going of bank sector. The only positive thing is less bank less competition and fewer chances of further NPAs - No competitions no lubricating interest rates for customers.

Now the second thing, the fiscal deficit, which is a real mess if you are +2 student and trying to calculate national income via problems given in books. During the 2008 recession and post-2008, the government never aimed to lower the fiscal deficit at least not up to 2011–12, when it came down to 4.9% from 6.6%. However, after 2014 the government set the goal of 3.5% and now it is hovering around 3.39% which indeed is remarkable. However, it will be very hard to maintain the goal for FY 2019-20 as 77% of the target has been reached in just 4 months and we have 6 tough months for next 23%, which indeed a matter of concern.

During 2008, to cope with the global recession period, the government put the fiscal deficit on stake and formulated short-term solutions, as a result now economy is in unnecessary pressure as the government is bounding the fiscal deficit percentage, and it will be an achievement if government succeed to manage fiscal percent around 4% by the end of FY 2019–20.

Now, if I talk about the present scenario, the real problem lies basically in disturbed demand and supply chain, demand is falling, as a result affecting the supply. People now tend to save money due to various uncertainties.

What are these uncertainties? Well, they are in both national and global. The national uncertainties are like some of the government’s policies upon which they took a U-turn, such as the announcement of electric vehicles but now the government seems to give up on the idea for the moment. A government with a majority should have a clear mind.

Secondly, the government is aiming for ₹5 trillion economy, which needs around 14.2% GDP per quarter from now, which is humongous and impossible in such globally uncertain environment. We can achieve that but for that, we need a Finance Minister someone who is bold and knowledgable with broad vision both, and we have neither. So, moral of the story is don’t dream for ₹5 trillion economy at least for now.

Thirdly, Nirmala Sitaraman is never a good choice for Finance Ministry, not every woman knows the management of funds, not in the case of Sitaraman at least. FM is a critical ministry and needs a person who has experience or someone from the department. She needs to be transferred to some other ministry. Finance ministry doesn’t seem to be her cup of tea.

On global uncertainties, the primary concern is the situation of the global trade war, globally we’re going through a tough phase thanks to China, Pakistan and N Korea & the USA to adding fuel to the fire collectively, leading to the fear of recession. You don’t know when Mr. Trump will tweet to spark trade war tension between China and the USA, don’t know when he put restrictions on Iran. Such incidents literally made market fluctuating and thus no one knows what will come the next morning. In such circumstances, no one is willing to invest their money hence a leading for a global crisis and economic ramble.

Even all the above-listed uncertainties are also taking a toll of Dollar Index and I won’t be surprised by seeing USD to INR around ₹74 or ₹75 in upcoming days.

As a foreign investor, the tension between India and Pakistan is also a matter of concern since at the same time China, India, and Pakistan in some kind of cold war, which is never a healthy situation for the global economy. However, most of the countries not taking it seriously but as an investor, you will surely think twice. Even in India, we need to ease out our restrictions that are imposed by the Government on FDI we have too many impositions on FDI.

On concluding note, I don’t think things are going to change in the upcoming 6 months at least it is likely to get worst, worst in terms of uncertainty for the market leading to more saving and less expense and which is enough for the recession to expand.

I am here so that I can open the archives of my memory
I wish to deliver what I have received from mankind to mankind
I wish to light-up darkness to enlighten the hidden treasures,
And in that process, I am writing what I have found from mankind.
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