It is now almost clear from all types of economic indicators that the Indian economy is in a dilemma or in a recession, and there is a possibility of worsening the situation in coming months.
Any economy runs through four types of economic engines –
1. Public expenditure & investment by government in infrastructure and development projects
2. Internal domestic consumption i.e. goods and Consumption of services
3. Private investments in new projects
4. External consumption i.e. exports of goods and services.
So by the end of last fiscal year, First & second engines were seen moving at normal speed, but third & fourth engines had already stopped in recent years.
First, the government was spreading resources in the infrastructure, that is, public investment was growing at a healthy rate. Second, even after demonetization & shocks like GST consumer durable, FMCG etc. saw a healthy jump of 15-16 per cent.
But third & fourth engine were under performing for country, the condition of export and private investment is worse than the last several years. In 2013-14, India’s exports reached a peak of $ 314.88 billion, but in 2015-16, the exports were only $ 262.2billion. It improved slightly in 2017-18 and the figure reached $ 303.3 billion, although it is still below the level of 2013-14.
The fourth and the hottest engine for any economy is private investment. In the FY 2018-19, private investment proposals amounted to only Rs.9.5 lakh crore, which is the lowest in the last 14 years. Private investment of Rs.25 lakh crore was made on an average between 2006-07 to 2010-11.
And now in Q-1 of FY19-20 there are signs that domestic consumption is also declining. That is now the condition of the second engine has gone wrong and no economy can be trusted only by first engine. Not only that, the speed of the first engine i.e. the public expenditure is also not good. At the end of the last FY, due to low growth in revenue and uncertain fiscal deficit, the government started curbing government spending.
Other important figures of the economy are also not very encouraging.
IMF revised the GDP growth to only 7% 2019-20, whereas in 2015-16, it has remained around 8 per cent. Gross Value Added (GVA) has also dropped to 6.79% compared to 8.03%. In February, the IIP (Index of Industrial Production) increased by just 0.1 percent, the lowest in the last 20 months and in March 2019it has actually declined by -0.1 percent.
The pace of job creation is very slow in this fiscal. According to EPFO data, the average monthly job creation has declined by -3.3% to 13.46 lakhs jobs in Q-1 of FY20 in comparison with 13.92 Lakhs job created in last quarter FY19 which was already on declining trend.