Stagflation: A Threat to India

India is entering into the stage of stagflation, just 2 years ago it was expanding at 8% and emerging as a major global player, the situation has come down to this. With higher prices of food, The new citizenship act, and the central bank's target, India is meeting its slowest development in a decade. The inflation in December 2019 increased to 7.35 percent which was the highest since July 2014, which is past the RBI limit of 6%. But what led to this situation?
We have had demonetization in 2016, the implementation of GST followed by many other policies but what led to this?  Let's look at some facts. The consumption of volatile oil makes up about 60% of gross domestic product which puts off all the investment plans. Economic growth in the fiscal year through March 31 is set to slow to an estimated 5%. Teresa John, an economist at Nirmal Bang Equities Pvt in Mumbai, quoted “The recovery is likely to be very gradual and a stagflation scenario is likely.”

The government has been taking steps to revive the economy but they are not doing much good. With the biggest privatization in history, the government is planning to sell state assets. “The critical problem in the Indian economy is demand. You definitely want to stimulate demand,” Abhijit Banerjee, winner of the Nobel prize for economics last year, stated. Depending on the quick global demand and domestic spending, economists are forecasting a little rebound in growth to 6.2% in coming march,2021. At a Mumbai conference, Nouriel Roubini, a New York University professor and well-known economic doomsayer said that inspite of concentrating on the real issues, the policymakers were concentrating on political things. He even added slowdown is going to give way to a significant pick-up in growth in this financial year.