The downturn in the Indian economy continues

August 06, 2019 05:04 pm | Updated 05:06 pm IST

Slow but sure: Firms across sectors, especially auto and FMCG, have been seeing fall in sales. Arunangsu Roy Chowdhury

Slow but sure: Firms across sectors, especially auto and FMCG, have been seeing fall in sales. Arunangsu Roy Chowdhury

India dropped two places in GDP rankings in 2018 compared to 2017. With a slump in consumption, and new investments reducing to a trickle, the government’s aim of making India a $5-trillion economy by 2024 seems far-fetched.

Drop in position

In 2017, the size of the Indian economy stood at $2.65 trillion, the fifth largest. In 2018, the Indian economy in USD terms grew by 3.01% to $2.73 trillion. But in the same period, the United Kingdom and France grew by 6.8% and 7.3% respectively, pushing India to the seventh place in the World Bank’s GDP rankings in 2018.

Size of leading economies (in $ trillion)

 

Consumption drops

Three of the four major indicators of the consumer economy, viz. passenger vehicle sales, two-wheeler sales and domestic tractor sales recorded negative growth rates in the first half of 2019. In May 2019, passenger vehicle sales registered its lowest growth since January 2014. Only domestic air traffic showed positive growth. The graph shows year-on-year % growth of the four macroeconomic indicators.

Consumer economy status check

image/svg+xml
 

Investment woes

Investments in new projects nosedived to a 15-year low in the quarter ending June 2019. The drop in the value of new projects was driven by a dip in both private and government investments. This was unlike the previous two quarters when the drop was largely due to fall in private investments.  The unfaded portion shows the recent downturn.

Plunging investments

 

Downward revision

The International Monetary Fund (IMF), Asian Development Bank (ADB) and CRISIL brought down their GDP projections for India for FY20. While both IMF and ADB have projected that India will grow at 7% or more, CRISIL has estimated that the GDP will grow by 6.9%.

GDP Projections

 

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