Union Finance Minister Nirmala Sitharaman has insisted that things are not as bad as they are being presented on the economic front. This is despite the fact that the quarterly GDP growth rate has touched the lowest since January-March 2013 and the nominal GDP growth rate the lowest in the current 2011-12 series.
Earlier this month, Nirmala Sitharaman admitted that it would “too presumptive” to say that the downward spiral of GDP growth rate has reached its bottom. This means at 4.5 per cent for the July-September quarter might not be the lowest GDP growth rate for the current fiscal year.
The economy has been slowing down for six consecutive quarters despite the Narendra Modi government announcing a slew of measures to arrest the slide of GDP growth rate.
Sitharaman, however, is technically right that despite unabated slowdown Indian economy is not in recession, which is a stage when contraction in GDP occurs for two consecutive quarters. For a huge economy like India’s, the recession is difficult. The last time it was witnessed in 1979 – when almost half of India was not yet born.
Economists call the continued slowdown quarter after quarter a growth recession. This is as damaging as recession. Here the economy continues to grow but people continue to lose employment, and hence income leading to declining in consumption spiralling into a reduction in investment triggering further loss of employment and the economy is trapped in a vicious cycle.
The situation is like a perfect storm where a way out cannot be seen. The only option left to those trapped in such a storm to wait to ensure minimum damage is done, and hope the storm dissipates on its own.
The current growth recession seems to have put India in a similar situation where despite desperate attempts by the Modi government, the slowdown continues.
SHRINKING POCKET SIZE
Datapoint out that economic slowdown did not begin in 2019. It had been building up over time. Declining growth in consumption has been held as the primary factor for the current economic downturn. It is about money in the pocket. Data tell that wages have been falling since January 2018 both in agriculture and non-agriculture work.
Consumption had begun its slide from a high of almost 10 per cent in September 2018 quarter. It continued to decline till it reached an 18-quarter low of 3 per cent in the April-June quarter of 2019. Private consumption has improved to 5 per cent in the September quarter. It is really good news. But the damage has been done. (MR, Inputs: Agencies).