Shady Look of Indian Economy

It looks as if the growth rate will be below 7% this fiscal year which translates roughly to a loss of ₹1.5 lakh crore of national income. What it signifies is millions of jobs not created.

Ever-strengthening rupee is also a significant challenge to the domestic industry. Since January the rupee is 7% stronger compared to the American dollar. It is stronger than its Asian peer currencies too, including China, the Philippines, Indonesia and Thailand. This directly hurts our export prospects.

The strong rupee also hurts the domestic industry since cheaper imports flood the country. The GST regime has given an extra advantage to importer traders since the countervailing duty that they now pay as GST can be offset against other taxes.

Demonetisation has its adverse effects as well. Investment and consumption spending which were postponed due to cash shortage might recover but jobs that are lost are lost forever.

The agriculture sector GDP shows nominal GDP growth to be lower than real GDP, which will mean depression in farmers’ incomes.

Solution to these problems is a big pick-up in manufacturing and private investment spending. Structural reforms of GST, the new insolvency code, the new monetary framework and Aadhaar linkage might show better results in the medium to long term.