Indian economy not in recession mode

Indian economy not in recession mode,Indian economy continue in slowdown mode for some more time,Global slowdown impact minimal on Indian economy

      Indian economy is facing difficult position. Private consumption has come down, investments are not coming, gross tax revenue has come down, net export down and trade deficit up. Particularly, domestic car sales, domestic two-wheeler sales, domestic tractor sales and commercial vehicle sales are down since several months. Inventory of household sector is piling up. This month( July) even TV sales have come down.


 At the same time, this month (July) , net exports up. In FMCG sector cos like Marico, ITC, Dabur, West side and Trent increased its earnings in the last season. Bata increased its earnings. So, the results are mixed but growth rate is downwards. First quarter, it was 5.8% and second quarter also likely below 6%. It is first time after 7 years, continuous two quarters growth rate is down. So, there is a talk now that India may enter into recession? 


  India is in slowdown mode, no doubt but whether recession grips or not , it is topmost guessing point to many experts. Indicators are in confused mode. Certain indicators are pointing towards gloomy picture. Private consumption and investment are two important factors. Government must take more steps to improve in these segments. Implementation of GST ( One nation, one tax) is the biggest economic reform since Independence. It is not yet fully stabilised. Its revenue is not on expected lines. Unless revenue grows, economy will not set right. Some experts are suggesting fiscal stimulus to overcome the situation which was a standard Mantra since FDR ( US) times. Some experts differ on this. 


  Global environment is not conducive for growth. Slowdown spreads all over Europe, China (Second largest economy). Only , US, the largest economy is yet to show any slowdown but experts predict it next year. US-China trade war triggered the slowdown.The successful resolution of this dispute will help overcoming the slowdown but chances are not bright. 


  Coming to domestic front again, reports say that household savings as a percentage of GDP has come down. Actually, it is not true. On the basis of it, some are predicting that India is entering recession mode. But the calculation parameters for household savings is changed now when compared to past figures. For example, quasi corporates were part of household savings in 2011-12 GDP series whereas now these were part of Corporate sector. Naturally, to that extent, household sector savings have comedown , otherwise, its ratio is almost same. Similarly, oil prices are expected around $50 in the coming months which is advantageous to India. FDI arrivals are at the same level.Bank lending though on positive side is not growing to the potential. Recapitalisation promised in the Budget is yet to materialise. Resolution process of NCLAT is yet to pick up though amendments were already approved to IBC Act. Government must address this issue immediately. Moreover, the impact of global slowdown may not be too big impact on Indian economy because our export portfolio ratio to GDP is not quite significant. In fact, our trade balance is surplus if we remove China. It is the sole factor for our trade deficit. Government must address this issue seriously. 


 In sum, our economic situation is not that bad to categorise into recession mode but it is also not good. Slowdown mode will continue some more time but in the long run, our position will improve and comparatively far better than rest of the world. It seems Government may come out with concrete proposals very soon to tide over the situation. We must be cautious but not worrisome as predicted by some experts. 
 

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