Addressing structural issues in the economy. The article authored by Parth Guptha PGDM 2021, was published by BusinessLine on Campus.
Economic restructuring comes at a cost and yields results with a lag but there’s no gain without pain India Inc is facing an economic slowdown due to weakness in private consumption. Consumption expenditure grew only by 3.1 per cent in Q1FY20, a 17-quarter low compared to 7.2 per cent in Q4FY19. Private consumption is a key driver of growth in India, constituting around 59 per cent of GDP. Unemployment rates are at a three-year high, at 8.4 per cent in August, as per the Centre for Monitoring Indian Economy (CMIE). Additionally, the rupee depreciated following slower trade growth, volatile global economic conditions (US-China trade wars and oil price uncertainties), and fluctuating foreign capital inflows.
The RBI’s forward-looking surveys continue to point to feeble demand conditions and the central bank now expects the economy to grow by only 5.3 to 6.1 per cent in Q2 2019-20, compared to the earlier forecast of 6.9 per cent. Weak demand is expected to keep CPI inflation around an average of 3.4 to 4 per cent in 2019-20, well within the target.
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