“The Economist” continues, “Consumer demand has levelled off or fallen… Sales of cars and motorbikes have tumbled by 20% or more. And with the combined fiscal deficit of the federal government and the states already approaching 9% of GDP, and tax receipts falling well below expectations, there is little scope for stimulus.”

Admitting that in 2014 the Modi government inherited an economy “with plenty of problems”, it insists, “But it did too little about them. The latest downturn continues that disappointing pattern. With the exception of a steep cut in corporate taxes earlier this month, to 25%, which brings India into line with other countries in the region, the official response has been scattershot and timid.”
 

Instead of getting to grips with the economy, Modi will stop posing as a reformer and fully embrace his alter ego, as a chest-thumping Hindu nationalist

Pointing towards “an unusual paucity of expertise” in the Modi government and “conflicting views in his circle”, at a time when “competing interest groups vie for his ear”, the periodical advises Modi to “recruit an economic team that is based on competence and experience rather than affinity for the Bharatiya Janata Party’s Hindu-nationalist ideology.”

Recommending privatization of state-owned banks as part of a “broader” privatisation programme that could give the government “the money it needs to succour demand”, even as making use of “levers such as the national rural-employment scheme to get money to the distressed hinterland”, “The Economist” sounds a worry: “The fear is that, instead of getting to grips with the economy, Modi will stop posing as a reformer and fully embrace his alter ego, as a chest-thumping Hindu nationalist.”

Recalling steps like abolition of special status to Jammu and Kashmir, “India’s only Muslim-majority state” and threat to “expand to the rest of the country his scheme to hunt down supposed foreign interlopers in Assam”, “The Economist” warns, ““In the face of India’s growing economic problems, focus on communal grievances seems even more reprehensible.”

Courtesy: Counter View

 

 

Pointing out that the “growth decelerated by 3 percentage points in the last year and growth in the second quarter of this year was the lowest in over six years”, the South Asia report says, “Manufacturing growth fell from over 10 percent a year ago to below 1 percent in the second quarter of 2019.” It adds, while this drop “follows the global trend”, it is “more pronounced.”

Thus, “Services and construction also started decelerating over the last quarters, suggesting that the slowdown is not related to idiosyncratic factors related to a specific sector. Export growth recently declined – in line with slowing world growth and weak external demand – but cannot alone explain India’s sharp downturn.”

The report underlines, “The slowdown is mostly due to a deceleration in domestic demand. After years of contributing to high growth rates, domestic demand slipped and contributed the most to the disappointing performance in the last quarter. Private consumption and investment both grew slower than overall GDP in the second quarter of this year. Investment grew 4.0 percent (y-o-y) in the second quarter, compared to 13.3 percent a year ago, while private consumption grew 3.1 percent, compared to 7.3 percent a year ago.”
 

The report believes, “One reason for slowing private consumption is the strong contraction of car sales that started in mid-2018, driven in part by higher insurance premia, new emission norms, uncertainty about GST cuts, and the squeeze in the non-bank financial companies (NBFC) sector.”

“Together”, the report says, “Consumption and investment grew 6.0 percentage points slower than a year ago. In line with weakening domestic demand, import growth fell from 11.0 percent a year ago to only 4.2 percent in the second quarter of this year. With a growth rate of 8.6 percent, government consumption has become the fastest growing expenditure component.”

“In such a weak economic environment”, the report thinks, “Structural issues surface and the weak financial sector is becoming a drag on growth. Despite high economic growth in the last decade, India’s banking system still has a significant level of non-performing assets of close to 10 percent of total assets.”

Insisting that government steps have been inadequate, the report notes, “The introduction of the 2016 bankruptcy code and re-capitalizations of state-owned banks were necessary steps, but not enough to resolve the weakness.”

The report says, though “new regulatory and supervisory efforts from the Reserve Bank of India (RBI) that resulted in greater market discipline, and overall credit growth in the economy picked up again in July”, it warns, “Conditions could deteriorate further if the recent slowdown is not properly addressed and contained”, insisting, “This critical situation demands decisive policy actions.”
 

A separate India country brief in the same report says that, recently, while poverty did “decline”, implementation challenges remain high. Pointing towards “weaknesses in the rural economy and a high youth unemployment rate in urban areas may”, it says, these may “have moderated the pace of poverty reduction.”

It particularly underlines, “Disruptions brought about by the introduction of goods and services tax (GST) and demonetization, combined with stress in the rural economy and a high youth unemployment rate in urban areas, may have heightened the risks for the poorest households.”

The report believes, apart from other issues, “Broad-based poverty reduction remains a major challenge, in particular with respect to (i) presently excluded groups (such as women and scheduled tribes), and (ii) extending gains to a broader range of human development outcomes related to health, nutrition, education and gender.”

It adds, “The persistently low female labour force participation rate and high youth unemployment present risks to sustaining the current rate of poverty reduction. Furthermore, outdated information on indicators of poverty and employment limit the scope of reliably correlating growth forecasts with projected rates of poverty reduction.”

Courtesy: Counter View

On October 4, the Reserve Bank of India revealed that the confidence of the Indian consumers in the month of September has dropped to a six-year low in Prime Minister Modi’s tenure. The survey—conducted in 13 major cities—recorded the public sentiment on the general economic situation, where 47.9% of the households believed that it has worsened.

Nitesh, 23, an auto-driver in Gurugram was sure of this drop much before. According to him, over the recent months, the number of travellers opting for a sharing ride has increased. He says, “People are saving money wherever they can.” “Even those wearing a shirt and pant [hinting towards the travellers who belong to a relatively unaffected middle-class] are ready to wait for co-passengers, as sharing rides are cheaper.”

Nitesh is driving an auto since over a year now. Despite being a science graduate, he has been unable to secure a job. Now fearing that even his meagre income from driving the auto rickshaw will come under the grips of the economic ruin, he commented, “Hum sab iske shikaar honge… mazdoor aaj mar raha hai, hum kal marenge (We will all be the victims [of the slowdown]… Workers are facing the consequences today, others will face it tomorrow).”

An image of a shared auto-rickshaw in front of Gurugram’s Iffco Chowk Metro Station

“This is a season when a worker would take a break and return to their native village,” says Bikesh, “he would obviously want to look good and would happily pay extra to enjoy this luxury at least once in a year.”

However, this festive period, the wish to look good has become too difficult to afford. “People here don’t have money to eat food or to pay rent,” Rakesh explained, “They are going back home dejected this year.” “Who would want to look good after losing his job?” he asked.

Similar apprehensions were shared by Ajay (21), a cloth shop owner in the same locality, who is also extending a helping hand to his father in running the family business. According to him, the duo has not sat free even for a minute on Sundays in the month of October. “We had to do night shifts to serve all the customers,” Ajay says. However, the story is different, this October. His shop was deserted, when NewsClick approached him. Ajay agreed to explain it to us and get his photo clicked. His biggest worry was that he had ‘free time’ this festive season.

Ajay, 21, son of cloth shop owner. His biggest worry was that he had ‘free time’ this festive season.

In and around the Khandsa market, the roads were empty even on a Sunday afternoon. A scene so gloomy has never been observed by Amresh (21), a cyber cafe owner. He complained about not making enough commission, as fewer workers are coming to him to book tickets. As the glare turned to the rest of the market, the crisis was evident. The artisans at the jewellery stores were taking rest and the helpers at the general shops were staring at the unsold stock.

Amresh, 21, a cyber cafe owner in Khandsa village market who has never seen such a gloomy market scene on a Sunday afternoon.

The conversations of the public seem to have changed as a result of the slowdown. Lists of what items to purchase have been replaced with the items can be compromised. Luxuries have become a far off dream, when basic necessities are not getting fulfilled. To celebrate a festival has become unaffordable for the Indian citizen. The hustle and bustle of a festival market is under the clasp of the economic crisis this year and everyone, in the Khandsa market, longed for it.

Deepak Maini, general secretary of the Gurgaon Industrial Association claims that he had seen this coming. “The slowdown in the organised sector will have its shadow over the informal economy,” he told NewsClick. There is no demand, and according to him, it is the “fear” that has beleaguered the consumers’ purchasing behaviour.

“There are well over 10,000 factory units operating in Gurugram and a 20 to 25% production slump has been observed in all of them, across the industries,” he said. He added—conveniently using the industrial vocabulary—that the workers have been thus “put on a resting period” as a reaction to the drop in the production.

Call it just a “resting period” or retrenchment, the life of myriad of workers who lost their bread and butter have been completely turned upside down. The workers, who have not, are in no better condition. One example being that of Neeraj*, a contractual worker in one of Gurugram’s welding company. He has not received any bonus this year. “Earlier in our unit, 20-25 workers were employed,” Neeraj said, “now, only 5-6 are left.” “If I’ll ask for any bonus, the gates will be closed for me as well.”

Another worker who is currently employed in an auto component manufacturing unit but has felt the heat of the slowdown is Shyamlal*. For him, the slowdown has meant death by thousand cuts. “We used to work for 12 hours, which was first reduced to eight hours,” Shyamlal said, “then no production days were observed and eventually 7 out of 40 workers were retrenched.”

“Now, the employer is finding excuses to retrench us.” “We fear to even raise our voice now,” he said, adding, “though we have our jobs, they are now marred with constant fear.”

Incidentally, amidst the ongoing crisis episode, two states—Maharashtra and Haryana—known for their major industries, are set to go to Assembly polls this month. Will weak public sentiment over the economic situation translate into votes? The opposition would be banking on this, while the ruling government will do its utmost to distract the voters.

Courtesy: News Click

Razzak Ahmad, 27, a resident of Malhaur in Lucknow, who runs a mobile shop called Razzak Communications, recently ordered 20 high-end smartphones of different brands in the view of the coming festival season, but is yet to taste any profit. 

Ahmad, who has been running this mobile store for the past six years, says that this has been the first time he could not sell even a single high-end mobile phone for so many days.

“I invested a few lakhs of rupees in mobile phones and also in the accessories. Customers are coming and buying mobile accessories and getting their phone repaired, but they are not buying mobile phones even with maximum possible discounts and lucrative offers, like giving some freebies, with the mobile,” he says, adding, “I initially thought that people might be going for online shopping, but then we started giving a one-stop solution and even the after-sales services. Then, we got to know about what you call a slump or a slowdown in the Indian market.”

“It has been about four months that sales have fallen to a drastic low and despite getting easy finance schemes and other lucrative offers, people are not investing money. I do not know what the reason is, as Modi ji is doing so good and Pakistan is begging for money. But the cash flow in the market has decreased, which is not a good sign for business,” he says.

Meanwhile, Dishad Hussain, a Rashtrapati award-winning artist of brass metal in Moradabad has been running from pillar to post to get a new order from any firm of any size, as he claims to be sitting without any order for the past six months. 

“Our industry hardly gets hit by a recession or any slump because it is related to utensils or home décor. But this kind of situation has arisen where the brass businessmen have been sitting idle for the last few months and have only been eating from their savings,” he says while speaking to NewsClick.

“Big players, who deal internationally, are still safe, but the small, medium and micro size players have been affected a lot due to the uncertainty in the demand and also in the market. Initially, the note ban [demonetisation] broke us while the rest of our capacity was killed by the very bad execution of the GST; and now, this slowdown is going to make our kids starve,” he says.

The brass artisan further says that now the kids of the most skilled workers in the Peetalnagri (Moradabad) are not ready to join this profession.

“If this continues, then China and Malaysia will take over us very soon and Indian artisans will not get any work like what happened with Bangladesh in the late 90s. The market is crumbling with every passing day and I do not know about other sectors, but the brass work has been hit badly,” says Hussain.
Hussain is even contemplating writing a letter to Prime Minister Narendra Modi to fetch his attention towards the metal industry of Moradabad. 

Om Kumar, an architect with a leading firm in Lucknow—which has designed many five star properties in India—says that the firm has kept all the projects on hold.

“The situation has become even more serious than it was during the demonetisation. There is hardly anyone who wants to invest in the real estate sector these days and the condition is getting worse every day,” he said, adding, “The banks have also stopped lending loans and private investors are washing off their hands.”

“Earlier, a lot of people used to invest money in our sector because the rate of return was too high. A man, by investing lakhs of rupees, could get twice or thrice in return within two or three years, but now the market has drowned. The rate of properties remains sky-high with no people left to invest the money,” he says. 

Talking about the project his firm is doing, he told NewsClick, “At the moment, we are working only on two high-rise projects because over 70% of the work had been done and on a few floors, we have also given the possession. We have kept our four high rise projects one three star hotel and a mall project on hold, as there is not enough money with the firm to start the construction. We have failed in raising investment because due to uncertainty, we were unable to tell the investors about the return on investment and other important things.”

Courtesy: Newsclick.in