The Indian economy is on life-support and although the government is trying everything from blaming Congress, British, Mughals, Millenials to avert responsibility, the truth is out there for everyone to see. Though government does not accept that there is an economic slowdown but at the same time, Yogi Government of Uttar Pradesh has decided to fire at least 25,000 home guards deployed across police stations and traffic signals in Uttar Pradesh.
Nirmala Sitharaman has blamed Millenials for economic slowdown saying that young generation prefers to book cabs as opposed to buying cars. India’s Minister for law is of the opinion that if there is economic slowdown, how the movies are doing such great business over the weekends. This shows the amount of self-imposed ignorance among Indian Ministers and the extent to which they will go in order to escape responsibility.
The real reason behind the economic slowdown is the growing unemployment rate which rose to 8.5 per cent in October, the highest since August 2016, and up from 7.2 per cent in September, according to data released by the Centre for Monitoring Indian Economy (CMIE) exposing the economic slowdown.
The lack of reforms and politics of appeasement is what has devastated the country’s economy. The government is not paying enough attention on Free Trade Agreements (FTA). By promoting exports, free trade agreements can help the country move up the value pyramid. That can provide India an edge over non-member countries. However, the fact remains that we have not gained from existing FTAs.
The immediate cause of worry is plummeting demand. As Nobel laureate Abhijit Banerjee has pointed out, household consumption has fallen since Prime Minister Narendra Modi entered office in 2014, something that hasn’t happened ‘in many, many, many, many years.’
The immediate cause of the demand slowdown may be the blows of demonetization and the new indirect tax regime, adding up to the collapse of shadow banking credit last year. But there is also a much bigger cause of concern, promoting consumer demand should never have been considered a sustainable growth model in the first place. Instead, India should have been focusing on encouraging greater levels of private investment, which it did not do.
The government pays much more attention to loudmouths like Sambit Patra and Arnab Goswami who lauded demonetization and ignored the words of renowned economists like Manmohan Singh and Raghuram Rajan. Former RBI Governor explained in detail how demonetization and GST were a catastrophic move for country’s economy. He said: “out of the blue India demonetised 87.5 percent of the currency. Now, essentially what happened was the government said that Rs 500 note and Rs 1,000 note are no longer valid. What happens when you demonetised 87.5 percent of the currency? Basically, people don’t have currency to do transactions. Some of it was replaced; but it was replaced slowly. It took 3-4 months to replace it entirely.”