Indian Economy’s 2020 Anticipations

Indian economy grew at the slowest pace in over six year at 4.5 per cent during the second quarter of the current fiscal while it remained at 5 per cent in the first quarter which ended in June. It’s a zenith of several months of downbeat figures, from plunging car sales to shrinking factory output and an export slump. The festival demand uplift has been short-lived and the vegetable prices have risen uncharacteristically high for the season. The Reserve Bank of India has already cut interest rates throughout 2019 pausing only this month.

The RBI cutting rates and banks lower lending rates may help credit growth. But ambiguity in the jobs market and growing wariness among borrowers, are key dampeners that can impede the growth. Three of the four growth engines—private consumption, private investment, and exports—have slowed down significantly. The public sector banks have become too risk averse. They are not in a position to fund any risky business at the moment. The slackening of investment lowers the level of infrastructure development. Weak global demand due to escalation in trade wars may further impact India’s exports and investment activities. Further, private consumption, especially in rural areas, has weakened in recent months. Consumers or households have increased their liabilities in the last two years in which income growth slowed.

Along with this, there are a few signs of hope, and optimistic contradictions due to production from monetary and fiscal policy support easing in 2019, lower business taxes, partially eased labor regulations, further counter-cyclical stimulus expected in the forthcoming budget, improved rabi crop and other sector-specific relief measures which may result in the acceleration of India's GDP growth.

All in all, with no hidden drawbacks and the aims to rectify it, we expect 2020 to be a significantly better year for the Indian economy.

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