Prime Minister Narendra Modi comprehensively reviewed the state of the economy with finance minister Nirmala Sitharaman and other ministry officials to find solutions to the fast-pacing economic slowdown in multiple sectors that has eroded wealth and hit jobs. Sources said the government might soon provide a broad stimulus package or a sector-specific booster dose.
Modi, after delivering his sixth straight address to the nation on Independence Day from the ramparts of the Red Fort in Delhi, undertook a brainstorming session with Sitharaman and all top officials in her ministry, sources privy to the development said. The meeting, they said, was to assess the nature of the slowdown and its longterm impact. However, the finance ministry has remained tight-lipped on measures being contemplated to take the economy out. Reserve Bank Governor Shaktikanta Das had earlier this month stated that the slowdown is more cyclical than structural and the growth is expected to revive by the fourth quarter.
But there are ominous signs showing that the slowdown may be deep. India’s economic growth has slowed to 6.8% in 2018-19 - the slowest pace since 2014-15 - and consumer confidence is waning, while foreign direct investment has plateaued. International trade and currency war is further aggravating the problem. The auto sector is facing its worst crisis in two decades and reports suggest thousands of job losses in the automobile and ancillary industry. In the real estate sector, the number of unsold homes has increased while fast-moving consumer goods (FMCG) companies have reported a decline in volume growth in the first quarter.
Though lending by banks to industries has shown a significant jump from 0.9% in April-June quarter in 2018 to 6.6% for the same period this year, the same to job-creating MSME sector has slipped from 0.7% in 2018 to 0.6% in June quarter. Also, direct tax collections have grown by just 1.4%. The growth in GST collection till July this fiscal too has been only 9% as against 18% estimated in the Union Budget. Sales of cars, tractors and two-wheelers have declined to a 19-year low.
Sitharaman had held series of meetings with bankers, industry, capital market players and real estate earlier this month to firm up steps to increase investments and boost economy. Foreign investors during their meeting with Sitharaman had suggested that higher surcharge on income beyond £200,000, which was imposed in the Budget, should not be applicable on FPIs. The government's decision on surcharge had impacted the market.