Reasons Behind India’s Sinking Economy

The Indian economy has been reeling under a slump due to several factors from the last few years. The strongest admission of government regarding sinking economy has come recently when NITI Aayog Vice-Chairman Rajiv Kumar stated, “Nobody had faced this sort of situation in the last 70 years where entire financial system was under threat.”

In the month of April, the International Monetary Fund (IMF) had predicted that India would surge at a rate of 7.2 per cent in FY20, but the latest data trends indicated a fall in GDP growth (4.5 per cent). The IMF has mentioned, “the slow growth in rural incomes, domestic demand (as reflected in a sharp drop in sales of automobiles) and credit from non-banking financial companies (NBFCs)” as the reasonable causes.

Underlying causes for stagnancy in Indian economy

Many sectors that boost the Indian Economy encompass the Automobile, Real estate, FMCG, Manufacturing, Agriculture which are lagging behind in achieving desired growth rate and the job opportunities in these sectors are also declining at a large scale.

Global Slowdown is one of the major factors that is happening and given the fact that India is a net commodity exporter, there has been a fall in majority of the country’s exports. Apart from that, the global slowdown has also resulted in FDI only in the areas of speculative finance and distressed assets buying rather than into investments that would give a boost to the Real Economy.

Non-performing assets (NPA) have led most of the public sector banks in a poor situation. They have tightened lending options and due to bad debts and falling demand, the businesses are collapsing and not inviting any fresh investments.

Some of the experts are also of the view that the problems like Demonetization & stressed banking sector, GST Implementation and challenges in Agriculture sector have contributed majorly to the overall downfall of the economy.

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