IS INDIA MOVING TOWARDS RECESSION?

India had a really good growth rate prior to world economic recession prior to 2009. Our GDP growth rate was at double digits.  Indian economy managed to whether the storm of global economic slowdown.  Our nation grew 4 times faster than some of the world’s best economies.

Over the last year and half, our country has seen a complete turnaround. Our GDP growth is going down due to slowdown in industrial growth, inflation, rising fiscal deficit, poor governance, poor market & investor sentiments, and inability of government to bring about economic reforms, policy paralysis affecting FDI, loss of confidence of corporate, public and so on. Also corruption scandal, which props up everyday has not helped our country, thereby projecting India as one of the most corrupted countries in the world and poor investment country because of recent amendments in taxation (GAAR, Vodafone amendment). To earn those Rs 10,000 crores despite the landmark judgement of honourable Supreme Court in Vodafone case, It will trigger the outflow of FIIs from the country.

Growth had come down last year at 7.7 per cent in Q1 to 6.9 per cent in Q2 to 6.1 per cent in Q3 and investment had gone negative in Q2 and Q3. The IIP productions are continuously decreasing. The recent rate cut in RBI will not have much of impact as interest rates are still on a higher side, thereby ensuring the cost of capital is still higher.

The job creation in market is not happening at a rate at which it should have been. Actual tax receipts are nowhere close to budgeted tax receipts. Real estate sector is also going through a rough patch. Stock market is also very volatile and investors are staying out of it. INR has been depreciating against USD, euro, GBP and against all other currencies, and is reaching the peak in terms of fall in money value. Recent S&P downgrading has not helped the cause either.

 All these are signs that our country is going in to recession. We are accusing the Euro crisis, Japan Earthquake, slowdown in growth of China, Middle East crisis as slowdown in growth of the Indian Economy. But this isn’t the actual reason. Our country has dug a hole for itself. We have no one to blame today than ourselves. The coalition government is a serious hurdle and one of the main reasons for the situation we are in today.

What can we do from here to prevent such a situation? First of all the government has to be bold and bring about big economic reforms to stimulate the growth in our country. GST, DTC, opening up of various sectors through FDI, decontrol of fuel prices, improving the system of PDS avoiding wastage of food, thereby maintaining a check on inflation, learning lessons from Global economic slowdown in 2008, Euro crisis would help. Also a check on fiscal deficit is need of the hour along with bringing in more transparency in to the system thereby mitigating corruption. Decisions need to be taken quickly with accuracy.

Time for change has come. 2^nd part of 1991 is now required to prevent our country from going into recession and to those pre 1991 days.