The backbone of Indian Economy – eight core sectors electricity, coal, steel, cement, crude oil, natural gas, steel and fertilizer has been under tremendous distress at minus 0.5 per cent growth rate according to the data of the Commerce and Industry ministry. In this if go by sectors except fertilizers & steel all other sectors recorded decline amid low demand. Electricity, coal, crude oil, natural gas, cement recorded a decline of 2.9 per cent, 8.6 per cent, 5.4 per cent, 3.9 per cent, & 4.9 per cent respectively. During April to Aug core sector grew by only 2.4 per cent in comparison with 5.7 per cent in the year ago same period. The previous low was recorded at minus 1.3 per cent in November 2015 under first term of Modi Government.
However, fertiliser and steel production grew by 2.9 per cent, and 5 per cent respectively, during the month. The performance of the core sectors in August 2019 was disappointingly weak, with a broad-based fall in six of the eight constituents and as many as five sectors recording a year-on-year decline in Aug 2019.
The Indian economy is getting affected for both structural and cyclical reasons and if the government wants to bring it back on track, both short term and long term measures need to be adopted. As the Indian economy is demand-driven and recent data show that India’s consumption has declined significantly, the ever-growing FMCG (Fast-Moving Consumer Goods) sector is also affected by sluggishness, producing HUL, the country’s largest FMCG Company. There has been a decline of 7 per cent in total in HUL demand.
If the economy will grow at this pace, then it is natural to raise the question, how will India fulfil the objective of becoming a $ 5 trillion economy by the year 2024? Many efforts have been made by the government to deal with this worsening economic situation, but still the poor performance of many sectors indicates that the government should consider seriously in terms of the economy and its momentum to intensify, new ideas for growth should be discovered.
The government will have to take purely political decisions. The government will have to increase spending. However, it must also be kept in mind that the fiscal deficit should not be too much. When the global recession hit in 2007-08, the fiscal deficit had increased to 12 per cent. The government will have to put more emphasis on job creation, because when governments do not do job creation, then they create an environment of insecurity for the future. This is the truth of the present day Indian economy.
