The year 2019 was very volatile in terms of economy. This year, the slowdown in the world economy had an impact on the country’s economic growth. Our economy has been in the limelight this year due to the slippery pace of GDP growth, a steep decline in industrial production and an increase in retail inflation in the last two months of the year. According to analysts, this year saw pressure on the economy due to the impact of Global Slowdown and overhauling of the country’s economy. However, the slow growth has hit the target of making the country’s economy $ 5 trillion in the next five years.
Experts are hopeful that the pace of economic growth will be back on track from the second half of the next financial year and will help achieve sustainable growth. The government took a number of important measures, including a reduction in corporate tax, to get the sectors under pressure out of lethargy. Let’s know what were the main events related to the country’s economy this year and how the government continuously tried to handle the situation.
According to Brinda Jagirdar, former chief economist of SBI, it was a trend to invest in loans from banks in the last five-six years. There were also cases of divert investment. Due to this, bad loans of banks i.e. NPA (Non-Performing Asset) increased. The crisis escalated after the IL&FS crisis surfaced last year. This led to a shortage of cash with the banking sector and non-banking finance companies. They were not in a position to lend. This reduced cash flow and reduced both investment and demand. However, in the past few years, the government has taken measures to overhaul the economy, it will achieve sustainable growth rate in the coming years. According to him, all the measures of the government have brought transparency in the economy in the recent past. This has prevented corruption, money laundering. According to economists, banks have also benefited immensely from IBC.
DK Joshi, chief economist at rating agency Crisil, said that this year GDP has gone down and inflation has gone up. GDP growth rate has come down significantly. In that sense, this year has been very uneconomical. The condition of the economy has weakened further due to the ILFS crisis. The financial sector is called ‘lifeblood’. He said that the recovery will begin with the financial sector recovering. Recovery will be very slow. Industrial production is currently negative, import is negative. However, recovery seems to be occurring. The impact of reduction in corporate tax will not be seen very soon.
Speed of GDP growth so far
In the first quarter of the year i.e. January-March i.e. the fourth quarter of the financial year 2018-19, the GDP pace decreased to 5.8 percent. Earlier, in the last quarter of the financial year 2017-18, the pace of economic growth of the country was at a high level of 8.1 percent. From here onwards, the pace of economic growth was continuously reduced every quarter. During the first quarter (April-June) of the current financial year, the pace of GDP growth came down to 5 percent. Thereafter, GDP growth slowed further to 4.5 per cent in the September quarter. Thus the country’s GDP growth fell to a low of more than six years.
Automobile, banking, real estate under the most pressure
The year was full of challenges for the automobile sector. The decline in vehicle sales during the entire year has brought a lot of pressure on auto sector companies and related industries. According to data from the Society of Indian Automobile Manufacturers, total domestic sales of vehicles saw a decrease of 12 per cent in November this year. Earlier October saw a decrease of 12.76 percent in vehicle sales. In September, domestic sales recorded a steep decline of 22.41 per cent and the highest fall of 23.55 per cent in August. Vehicle sales declined by 18.71 percent in July, 12.34 percent in June, 8.62 percent in May and 15.93 percent in April. Due to this there were also reports of layoffs of employees by many companies. On the other hand, according to government data, the unemployment rate in the country reached the level of 45 years. With this, the banking and real estate sector saw the most pressure. During this period there was no significant improvement in the lending of banks.
Government took over
Finance Minister Nirmala Sitharaman took the front to bring the country’s economy back on track. The central government announced a drastic reduction in corporate tax on 20 September this year. It was seen as a masterstroke in terms of increasing investment. In addition, the government announced financial support to the realty sector. Apart from this, it was announced to create a National Investment Infrastructure Fund with an amount of Rs 10,000 crore. Apart from this, financial assistance for the MSME sector was also announced by the government. Realizing the economic slowdown in the country, the Reserve Bank of India started cutting the repo rate from February itself. The central bank reduced the repo rate by 1.35 percent this year.