India’s GDP slowdown won’t soon be reversed

By Hu Weijia Source:Global Times Published: 2019/11/17 21:14:08


Indian Prime Minister Narendra Modi addresses to the nation on the country's Independence Day from the ramparts of the historical Red Fort in New Delhi, India, August 15, 2019. Photo: IC

There is a downturn in India's economy, but will it become a protracted one? More specifically, will economic growth fall below 5 percent?

Credit rating agency Moody's has slashed India's GDP growth estimate to 5.6 percent for 2019. The GDP growth rate slipped to 5 percent year-on-year between April and June, the fifth consecutive quarter of deceleration. If the downward spiral in the economy continues, GDP growth will soon break below the 5-percent psychological barrier.

About a year ago, India was the world's fastest-growing major economy, but now it faces a sharp slowdown. Why has the economy fallen off the cliff?

Initially, India's economic expansion decelerated because of a decline in investment growth, but now the downward spiral is mainly being driven by slowdowns in consumption and manufacturing. 

A private survey showed expansion in the country's manufacturing sector hit its slowest pace in 15 months in August. Some time ago, India's Prime Minister Narendra Modi unveiled an economic strategy aiming to turn India into a global manufacturing hub, but the slowdown suggests the "Make in India" campaign hasn't been a success story.

Thus, growth in the Indian economy is likely to fall below the key level of 5 percent in the coming months, unless New Delhi draws up strong stimulus policies or carries out big economic reforms. The economy is edging closer to the alert line, but it seems New Delhi lacks awareness of the seriousness of the problem. 

Recent stimulus measures announced by the Indian government are deemed by many to be insufficient to reverse the economic slowdown, so there's a high probability that GDP growth will continue to weaken.

The Modi administration has set many economic goals but given little attention as to how they are to be achieved. There are no clear indications that the Indian government has a strong stimulus plan to boost growth and stabilize the economy. 

In terms of size alone, India has one of the world's largest economies and is one of the biggest potential markets for many multinational companies. But if India's GDP growth falls below 5 percent, the world economy may feel a chill. Chinese investors must prepare for the worst-case scenario if India's economic problems continue to deteriorate.

The author is a reporter with the Global Times.


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