Is the Indian Economy slowing down?

Indian Economy has unfortunately been in a difficult situation for the last one year. The RBI has scaled down the growth for 2019-2020 from 7 percent projected in June to 6.9 percent as announced on August 7, 2019. The reduction in projection for first half of the current financial year is stark, from 6.4 – 6.7 percent to 5.8 – 6.6 percent. The consumer perception index incorporating Current Situation and Future Expectation Index recorded a substantial decline in July 2019 as compared with a peak in March 2019. The situation is also not promising, both globally and domestically.

Globally, there is slowdown of growth in the US, UK, Japan and the Euro area. The trade war between the US and China is also adding immense uncertainty in global economy. The output in emerging countries like Brazil, Russia, and South Africa is not promising either. And gold prices are rising while crude prices are declining. Globally, financial markets are reflecting weak sentiments.

Domestically, according to the RBI, rainfall is scanty, and sown area currently under Kharif is lower than that in the previous year. The IIP for June 2019 reveals a slowing trend mainly because of manufacturing, especially in paper, fabricated metal products, electrical equipment, vehicles, trailers, transport equipment, furniture, etc. The capital goods manufacturing and that of consumer durables recorded a negative growth during April-June, 2019 while intermediate goods and consumer non-durables recorded a high growth. Unfortunately, demand is shrinking - in rural areas, sales of tractors and motor cycles has contracted; and in urban areas, sales of passenger cars shrunk and that of commercials vehicles is slowing down. Construction activity is suffering with shrinkage in output of cement and slower growth in steel consumption.