Name – Manali shah
Roll No. – 110609
Course – MBA-Finance
Economic Slowdown in India
Indian Economy
Abstract 1: – India’s Slowing Growth; India’s economic growth eased to 6.9% in the July-September quarter, the slowest rate of expansion in more than two years.

(Anonymous. Wall; New York, N.Y. [New York, N.Y]30 Nov 2011: n/a.)

The Reserve Bank of India has raised interest rates 13 times since March 2010 in a largely unsuccessful bid to combat stubbornly high inflation. The rate increases have choked off borrowing and crimped industrial expansion. Left, the RBI logo outside the bank’s headquarters in Mumbai, Aug. 9. India’s gross domestic product grew 6.9% year-on-year in July-September, down from 7.7% in the April-June quarter and marking the slowest rate of expansion in more than two years. Left, a construction worker poured concrete into molds at a building site in New Delhi, Nov. 26.


Abstract 2: – Do Elections Slow Down Economic Globalization Process in India? It’s Politics Stupid!

(Vadlamannati, Krishna Chaitanya.IDEAS Working Paper Series from RePEc; St. Louis, 2008).

In other words, do elections slowdown economic globalization process? The theoretical underpinning is that, policies of economic globalization lead to economic and social hardships in short run but benefit the economy in the long run. The motto behind slowing down the economic globalization process before elections is that it leads to polarization of voters and thus negatively affects the incumbent government. I make use of Axel Dreher’s economic globalization index and construct ‘instrumental electoral cycle’ to capture the scheduled and midterm election cycle. Using time series data for India for the period 1970 – 2006, I find that scheduled elections are associated with slowdown in economic globalization, whereas midterm elections are not. Replacing Dreher’s economic globalization index with our modified globalization index does not alter the results. I also find that slowdown in economic globalization process is responsive to the propinquity to a schedule election year. Meaning, as incumbent government nears the schedule elections, economic globalization process keeps slowing down, while this is exactly opposite during the early years of incumbent government in office. These results suggest that elections generate “electoral globalization cycle” in developing democratic country like India.


Abstract 3: – INDIA’S RUNAWAY ECONOMIC GROWTH EXPECTED TO SLOW DOWN MARGINALLY

(US Fed News Service, Including US State News; Washington, D.C. [Washington, D.C]28 Mar 2008.)

In India, questions are being raised over how a possible economic downturn in the United States will impact India’s fast-growing economy. As Anjana Pasricha reports from New Delhi, India’s economy is expected to slow down slightly, but continue to grow at a healthy pace in the coming year. India’s domestic demand comes from its 50 million-strong middle class. Their growing incomes have fueled purchases of automobiles, mobile phones and homes, and contributed to rapid businesses growth. However, economists warn that consumer demand will not be as buoyant as it was in previous years – primarily because rising inflation in the past year has prompted the government to raise interest rates. The government says it expects the economy to expand at 8.7 per cent in the coming year, compared to 9.6 per cent a year ago. For investors looking for clues about the stock market, the decrease may be disheartening. But India is still expected to rank among the world’s fastest growing economies.


Abstract 4: – INDIA’S ECONOMIC GROWTH LIKELY TO SLOW DOWN TO 7-7.5%: PM

(Asia Pulse; Rhodes [Rhodes]13 Feb 2012.)

India’s economic growth is likely to slow down to 7-7.5 per cent this fiscal year from 8.4 per cent last year. Growth in the current fiscal year year is likely to be lower, between 7 and 7.5 per cent, in a large measure due to the continuing uncertainty in the global economic environment. India’s economy had expanded by 8.4 per cent in 2010-11 financial year.


Abstract 5: – As India’s Growth Slows, Leaders Face Political Headwinds

(New York Times (Online), New York: New York Times Company. Jun 14, 2011.)

India’s central government, convulsed by a series of corruption scandals, is under increasing pressure to deal with the potentially conflicting challenges of rising inflation and slowing growth. But any effort to deal with the underlying problems that plague the Indian economy runs directly into powerful political interests. On Tuesday, India’s government said inflation increased 9.1 percent in May, compared with a year earlier, a higher rate than expected. That came atop troubling economic data indicating India’s gross domestic product growth had slowed, as companies spent less, foreign investment dropped and bad loans piled up at some banks.

Each of those issues is enveloped in a political thicket, though. And the current government has shown little willingness to even try changes. The O.E.C.D. report highlighted India’s low spending on health — just 1 percent of the country’s G.D.P. — and the contrast to the country’s high spending on subsidies for food, fuel, fertilizer and electricity, at 9 percent of G.D.P.

Local investment growth slowed in the second half of the fiscal year that ended March 31 to 4.1 percent, down from a 14.7 percent rate at the beginning of the year.


Abstract 6: – India growth slow down bottomed
(Commodity Online; Mumbai (Jan 12, 2015)).

The slowdown in India’s growth has bottomed out and the pace of economic expansion is likely to gain momentum. India recorded GDP growth of 5.3% for Q2 FY15 which is lower than the 5.7% growth witnessed in the previous quarter, though better than the 5.2% growth recorded in same quarter last fiscal.The representatives of India Trade and Industry recently made various recommendations for consideration of the the Finance Minister while formulating the budgetary proposals for the financial year 2015-16.The major recommendations included measures for fiscal consolidation, promoting investment (both domestic and foreign), containing inflation, generating employment and creating skills as well as for facilitating ease of doing business among others.

Various suggestions were also made with regard to tax reforms and tax administration including genuine efforts to establish non-adversarial and conducive tax environment, tax regime to be made predictable, sustainable and transparent among others.


Abstract 7: – India’s quarterly economic growth 6.9 percent – slowest in 2 years
(McClatchy – Tribune Business News; Washington [Washington]30 Nov 2011.)

The Indian economy grew at 6.9 per cent year-on-year in the July to September quarter, its slowest growth in two years, government data showed Wednesday. High inflation, steep interest rates and the eurozone financial crisis had led to a slowdown of demand impacting gross domestic product growth (GDP), analysts said. The decrease in the growth of GDP in second quarter of 2011-12 was largely due to the negative growth in mining and quarrying and manufacturing sectors, a release from the Ministry of Statistics and Programme Implementation said. The Indian economy, which grew at 7.7 per cent in the April-June quarter, has been progressively slowing down since January 2010. India recorded GDP growth of 8.5 per cent in the fiscal year that ended March 30, but with inflation hovering around 9 per cent for several months, the government has lowered its economic growth estimates for the current financial year to 7.6 per cent. In a bid to tame inflation, the Reserve Bank of India has hiked interest rates 13 times since March 2010 and corporations say this has curbed fresh investment leading to the slowdown. Year-on-year inflation linked to a wholesale price index has remained above 9 per cent from December 2010.


Abstract 8: – India headed for slow down, govt signals in Economic Survey
(The Hindustan Times; New Delhi [New Delhi]26 Feb 2016.)

India is poised to slow down, the government signalled on Friday as its annual report card pegged GDP growth for 2016-17 at 7 to 7.75% – a downtick from the 7.6% estimated for this year. Despite the slowdown, the country will remain the world’s fastest growing major economy and a “haven of stability” in a wobbly global economy, the pre-budget Economic Survey for 2015-16 tabled in Parliament on Friday said. The survey spoke of a “Chakravyuha challenge” in easing investments and dismantling exit barriers, making a strong pitch for immediate reform measures such as the Goods and Services tax (GST) and labour reforms. This will help bring more people under the tax net and raise property tax rates to check speculation in India’s realty market marred by opaque deals. Another key concern is job creation for millions of Indians who will join the work-force every year over the next decade, the survey warned, adding India needs to “create enough ‘good jobs’ – jobs that are safe and pay well, and encourage firms and workers to improve skills and productivity”. The 23.5% average hike in the central government employees’ salaries, as recommended by the pay panel, could push up the government’s wage bill by an estimated Rs 1.02 lakh crore in 2016-17. India has budgeted to control fiscal deficit to 3.9% of GDP in 2015-16, bring it down to 3.5% next year and further reduce it to 3% of GDP the year after. While a fiscal deficit of 3.9% 2016-17 was “achievable”, the coming year is “expected to be challenging one from the fiscal point of view”. “Implementation of the Pay Commission recommendations and the OROP scheme will put additional burden on expenditure,”


Abstract 9: – India’s economic growth may slow down to four-year low of 6.5% in FY18
(Accord Fintech; Mumbai [Mumbai]08 Jan 2018.)

The Central Statistics Office (CSO), under Ministry of Statistics and Programme Implementation, in its First Advance Estimates of National Income, 2017-18, has stated that Indian economy is expected to grow at a four-year low of 6.5 percent in the current fiscal year 2017-18, as against 7.1 percent in the fiscal year 2016-17. It is even lower than the Reserve Bank’s lowered projection of 6.7 percent. Poor performance of agriculture, mining and construction sectors, along with the lingering impact of demonetization and the Goods and Services Tax (GST), mainly pulled down the growth prospects of the Indian economy. Before this, the slowest expansion in GDP was in 2013-14, when it grew by 6.4 percent. Among the sectors, ‘public administration, defense and other services’ is expected to register the sharpest growth of 9.4% this fiscal, followed by trade, hotels, transport, communication and services related to broadcasting, which is expected to expand by 8.7%. ‘Electricity, gas, water supply & other utility services’ and ‘Financial, real estate & professional services’ are expected to registered a growth of 7.5% and 7.3% respectively. On the other hand, growth in the ‘agriculture, forestry and fishing’, ‘mining and quarrying’, ‘manufacturing’ and ‘construction’ sectors are estimated to be 2.1%, 2.9%, 4.6% and 3.6%, respectively.


Abstract 10: – India’s economic growth will slow down to 7.3% in 2019, 2020

(Accord Fintech; Mumbai [Mumbai]09 Nov 2018.)

Warning of a credit squeeze for non-banking financial entities, global rating agency Moody’s Investors Service in its latest report has forecasted that India’s economic growth will slow down to 7.3% in 2019 and 2020 from 7.4% in 2018, as domestic demand tapers on higher borrowing cost due to rising interest rates. It said the greatest downside risk to India’s growth prospects stem from concerns about its financial sector.

The report titled ‘Global Macro Outlook 2019-20’ stated that the economy grew 7.9% in the first half (January-June) of 2018, which reflects post demonetisation base effect. Moody’s said factors that will limit the pace of the Indian economy’s growth over the next few years includes borrowing costs which have already increased on higher interest rates. It also expects the Reserve Bank will continue to steadily raise the benchmark rate through 2019, which will further dampen domestic demand.

The rating agency said the impact of higher global oil prices compounded by sharp rupee depreciation raises the cost of households’ consumption basket, and will weigh on households’ capacity for other expenditures. It added that borrowing costs have already risen because of tightening monetary policy. It said, in the short term while measures to stabilise the financial sector are put in place, credit growth is likely to slow. It also said downside risks from a prolonged liquidity squeeze for non-bank financial institutions, which could lead to a sharper slowdown in their credit provision, remain. On the global economic front, Moody’s said global economic growth will slow in 2019 and 2020 to a little under 2.9% from an estimated 3.3% in 2018 and 2017. The US-based agency expects trade and geopolitical frictions between the US and China to persist for some time. It added that this will weigh on the global trade growth and will reshape trade flows and supply chains.


Conclusion: –

India’s current economic slowdown reflects both cyclical and structural factors. A slowdown in the investment cycle, combined with supply constraints and a subdued external environment has caused growth to slow to below trend. With weak global demand for exports, India’s continued economic expansion will have to rely increasingly on domestic growth drivers. However, the pace of structural reforms has been slow due to political gridlock; after high-profile corruption scandals in recent years (notably the mis-selling of telecommunications licences in 2008), many key economic reforms have stalled as a result of slower government decision making. Further, in terms of policy response, the government faces a dilemma whereby high inflation have complicated the RBI’s management of the rupee while the twin deficits significantly limit the monetary space for more aggressive countercyclical policy measures.

If India persists with a lack of reforms to rectify the macroeconomic imbalances, it could inhibit the country’s growth potential. The IMF has estimated India’s potential growth rate at a much higher 7½-8½% (IMF 2010), and underpinning optimism over the country’s medium-term growth prospects are favourable demographics and significant progress towards economic liberalisation since the late 1980s. To realise India’s growth potential, major structural reforms aimed at improving the investment climate are necessary. In particular, legislative initiatives concerning land acquisition and mining, tax and financial sector reform as well as FDI in multi-brand retail, are important for ensuring the sustainability of its high growth. To mitigate supply constraints and facilitate non-inflationary growth, speeding up reforms in the power sector is an urgent priority, particularly through better allocation of domestic coal via pricing and reform of electricity tariffs (IMF 2012). Given recent important personnel changes in the finance ministry, it remains to be seen if the government will finally bite the bullet on a host of long-awaited policy measures, thus delivering the crucial structural reforms needed to restore confidence.

The Gross Domestic Product (GDP) in India expanded 4.5 % YoY in Sep 2019, following a growth of 5.0 % in the previous quarter. Real GDP Growth YoY data in India is updated quarterly, available from Jun 2005 to Sep 2019, with an average rate of 7.6 %. The data reached an all-time high of 13.3 % in Mar 2010 and a record low of 0.2 % in Mar 2009. CEIC calculates Real GDP Growth from quarterly Real GDP. Central Statistics Office provides Real GDP in local currency based on SNA 2008, at 2011-2012 prices. Real GDP prior to Q2 2012 is based on a combination of SNA 2008 and SNA 1993, at 2004-2005 prices. India’s growth deceleration seems worse, when compared to developed economies of Europe, United States and Japan.

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