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The growing momentum of India seems to be losing steam.
After registering 8.2 percent growth in 2023-24, the Indian economy grew by 5.4 percent in the second quarter of the current tax year (July-September 2024). This was the slowest growth in six quarters, almost 3 percentage points slower than the corresponding period of the previous tax year.
The delay in the Indian economy was confirmed by the National Statistics Office (NSO) When the recently unveiled progress estimates of GDP for the financial year 2024-25 showed that the economy could grow by 6.4 percent, almost 2 points slower than the previous year.
International institutions saw a delay from the Indian economy at the beginning of last year. In the assessment of global economic developments in April 2024, the IMF had predicted A decrease in the growth rate of India from 7.8 percent in 2023 to 6.8 percent in 2024, and a bit to 6.5 percent in 2025.
Although most economies would consider a growth rate above 6 percent ‘ambitious’ in the case of India, this level of economic expansion should be considered insufficient, since the current government has Set the target To turn the country into a developed nation by 2047. Growth of less than 7 percent can cast a shadow over the realization of this goal.
The expected delay must therefore be considered a wake-up call for the government to take corrective measures in various areas that stop the economy to grow with the rate that it could be. The most important thing of these is undoubtedly the most important of these the weakness in the demand of the economy that appeared in the first progress for the current tax year by the two most important components of GDP, consumption expenditure and fixed capital formation or investments.
Although an estimated consumption expenditure will grow slightly faster than in the previous tax year, the total share in GDP would remain lower than expected. However, according to the formation of fixed capital, according to estimates.
In recent years, the central government has strongly relied on higher public investments, in the expectation of the “To mix private investment‘According to the Indian finance minister Nirmala Sitharaman. The transition from the government to use government investments as a director was because of the disinclement of the private sector to increase investments despite a Steep reduction in corporation tax Immediately prior to the COVID-19 Pandemie.
During the current tax year, private investments rejected In two of the three -quarters, including in the most recent third quarter. There are indications that there are public investments Also refuse. Central government accounts show that in the first eight months of the current tax year (April-November 2024) the capital expenditure was more than 12 percent lower than in the corresponding period in the previous year.
The government seems to be missing in its intention to use government investments to use ‘crowd of private investments’. The slow behavior of expenditure for private consumption has adversely affected the current growth process of India. This is the largest component of GDP and therefore his main motivation. It has remained slow since the effect of the government stimulus packages that were provided during the COVID-19 Pandemie worn out.
During 2021-22 and 2022-23, expenditure for private consumption 60 percent of GDP exceeded two quarters, while in the following period it usually remained in the reach of the middle of the 50 percent, Even falls to 53 percent In the third quarter of the tax year 2023-24. By the end of 2024 there were indications of a delay in the question, because the sale of products ranging from cars to cookies decreased.
The sale of cars has a falling trend since the end of 2023, but after the mid -2024, the Decrease became steep. By means of December 2024The sale of cars fell on an annual basis to a negative area. FMCG companies (fast-moving consumer goods) are expected to be expected to register low growth with one figure in their income, because they increase the prices of their products due to the rising input costs.
These trends can largely be attributed to the wage snow suffered by the staff of India, a large majority of which are in the informal sector. But even the relatively small proportion of employees in the formal sector has experienced a decrease in their real wages in recent years.
A recent report prepared for the government by the Industrial Chamber, Federation of the Indian Chamber of Commerce and Industry (FICCI) and Quess Corp LtdA business service provider showed that although the nominal wages in six large production and infrastructure sectors have risen by 0.8-5.4 percent, the inflation of the retail trade was between 4.8 percent and 5.7 percent, which stagnating Or declining real wages implies. Wage -earners were more influenced than the number of shop inflation suggests that food inflation in India was consistent much higher, often close to double digits.
In sharp contrast, Bedrijfs In the same period. The growth of the profit share and a reduction in wage share in the formal sector of India has, not surprising, causes slow demand conditions in the economy.
Data on the labor market of India available through the Periodic workforce survey Support for the findings of the Ficci-Quess Corp report. In 2023-24, the share of employees who earned a regular wage/salary was only one fifth of the total workforce. 58 percent of this lot had no written work contract and 53 percent were not eligible for any social security benefit. They are clearly confronted with considerable uncertainties with regard to their wage income, which is no different than the state of 80 percent of India’s workforce, the ‘independent’ and informal work.
Unless the perverse conditions rule on the labor market, India will find it difficult to maintain high GDP growth, which causes doubts about his ability to transform itself into a developed nation in 2047.
Originally published under Creative commons Through 360Info™.