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India GDP growth rate slumps to 5.7 per cent - Comment


The important theme of today which is widely articulated and had immense implications stretching from common man to Government is the slump in Indian GDP growth. The current position of the Indian economy depicts the state of economic growth rate it attained over a period of time in an uncertain global and domestically environment . There are myriad factors which need to be declassified for better grasping of the situation that persisted to address the problem.

The downgrade in the Indian economy depicts various factors that are liable to cripple the growth rate of the country. Though its roots are inherited from the preceding Government i.e. the UPA term to present NDA term . The preceding Government in its tenure of 10 years witnessed tumultuous times ranging from Global Sub-prime crisis, Euro zone etc and domestically the policy paralysis is obviously visible upto 2014 general elections. The NDA lead Government recognized the slow down in the economic growth rate that was accumulated and promised to address the problem after forming the Government as early as possible. The Post-2014 general elections brought a big win the Narendra Modi to form his Government with his massive poll mandate for propelling the growth of the economy that was neglected in the previous regime.

The Narendra Modi Government took several out standing decision's to spur the economy and in this process he incepted the Jan Dan Yojana , improving the ease of doing Business, simplifying the rules and regulations for Business, passing Insolvency and Bankruptcy bill, creating Start ups, Make in India, etc had created a positive atmosphere in the economy. The country is also credited has second fastest growing economy in the world and also improved its rank in Ease of doing business reported by World Bank.

Though the Government had pursued several ways and means in invigorating the GDP growth rate but it failed to gain the steam. The recent reports exhorts this opinion that was forecasted by the Bretton Wood organizations and also RBI which is the central bank of India. The important problem among them is NPA 's of schedule Banks of which there are assets non-performing. These Banks lend huge amounts of capital to the Corporate houses for good returns when the state of economy was in boom . These companies invested heavily in Infrastructure related sectors but these projects were stuck up due to the Bureaucracy , environmental issues and court cases. Due to this Capital expenditure of the projects become exorbitant and the companies are not in a viable to run the projects due to this balance sheets of the companies were running on huge debts.

The another reason which has to be elevated to expose the Government decisiveness in implementing the DEMONETIZATION had subdued the economy to a great extent. This measure use to disband the composition of the higher currency notes in the economy and also to increase the Digital transactions . The Demonetization crippled sectors such as agriculture, medium and small scale industries , daily wage laborers etc had bear the brunt . This created a stagnation in the economy where it dampens the consumption and manufacturing sectors of the economy a lot.

The computing of growth rate by the CSO has also been altered .The GDP at Market prices is opted instead of GDP at factor costs. The Base year for computing GDP growth rate is promoted to 2011-12 instead of 2004-05 series . There are reports emanating from the eminent persons that computing of GDP growth rate in the outmoded method will pegged at 2 to 3 % only . The capital generation in the Banks is very low due to the Non-performing assets that was piled up in its accounts and also the private investment is stagnated. The Government is not in a position to announce the FISCAL STIMULUS to the sectors that will boost up the demand in the economy. The Government doesn't want to exceed the fiscal deficit that was stipulated in the FRBM ACT-2003.

The Government needs to address the problems that are confronting the economy in expedite manner and also it should work in tandem with all sectors for stimulation of the economics growth.

-B.Dwarakandha Reddy