Liaquat ali, Economist

In simple terms, the economy in 2019 faces many challenges like rural distress, slow pace of private investment and high finance cost. These together have subdued consumer sentiment which has further impacted everything from car sales to air passenger traffic.Consequently, slipping demand has impacted production levels further stalling hiring levels and wages."The government will have limited immediate lever from the fiscal space amid optimistic revenue assumptions. However the immediate focus of the policymakers would be to prop rural demand and improve agriculture terms of trade," said Madhavi Arora, Lead Economist, Edelweiss Securities."Besides, better monetary policy transmission of past cuts and possibly more cuts will likely be the focus of the monetary authority."The need for comprehensive fiscal support measures assume significance as the slowdown has become evident in sectors such as automobile, FMCG and aviation.Specifically, the automobile sector has been impacted the hardest. Off-take data showed that in April, car sales which indicate urban and semi-urban demand declined 19.93 per cent to 160,279 units.In the commercial vehicle segment, which is the key indicator of economic activity, domestic sales went down by 5.98 per cent to 68,680 units last month.Similarly, overall sales of two-wheelers, which include scooters, motorcycles and mopeds, edged lower by 16.36 per cent to 1,638,388 units.Recently, State Bank of India's Economic Research Department in a report said: "In Q4FY19, of 384 companies more than 330 companies exhibited negative growth in mid-line and bottom-line.""Perhaps, significantly depressed rural prices is disturbing rural income and weak demand is affecting the FMCG sector."Even on the macro-levels, the latest economic indicators, including Index of Eight Core Industries and Index of Industrial Production have shown a downward trend.However, to complicate the matter further, the government also has to remain fiscally prudent."Considering, the present fiscal situation it won't be an easy walk for the government. In the interim budget, the fiscal deficit target for FY 2019-20 is set at 3.4 percent of GDP," said Deepthi Mathew, Economist, Geojit Financial Services."In such a scenario, the government might resort to increased market borrowing that won't work well for private investors."Industry observers also opined that not only public investment but also RBI's monetary policy has to play a role in supporting growth.The RBI in April had lowered its key lending rate by 25 basis points (bps) to 6 per cent.A monetary policy easing allows banks to reduce their lending rates that helps both consumers and the industry to get cheaper finance."... private investments are not forthcoming, so public investment should continue to keep pace, which looks difficult given the current fiscal constraints," said Soumya Kanti Ghosh, Group Chief Economic Adviser, SBI."Therefore monetary policy should do heavy lifting as fiscal policy is constrained."Additionally, a faster transmission of earlier policy easing by lenders is required, as high interest rates and liquidity constraints have demoralised auto, home and capital goods consumers.As per a Finance Ministry report in March, though easing of monetary policy has the potential to support growth, the recent cuts in repo rate are yet to be transmitted to the weighted average lending rate of banks, thus the effects of the easing on investment activity are yet to manifest.(Rohit Vaid can be contacted at rohit.v@.in)( With inputs from IANS )

Home

City

Latest News

Cricket

LT Premium

National

International

Maharashtra

Opinions

Chhatrapati Sambhajinagar

Nagpur

Entertainment

Photos

Business

Technology

Sports

Lifestyle

Social Viral

Lokmat Games

Health

Narendra Modi

Lok Sabha Election 2024

Heatwave In India

Mumbai Water Cut

Maharashtra Lok Sabha Election

IPL 2024

Liaquat AliFOLLOW

Liaquat ali, Latest News

International :Hasina speaks to slain ex-Army officer's mother, assures justice

Dhaka, Aug 5 Bangladesh Prime Minister Sheikh Hasina has spoken to the mother of a former Army officer ... ...

International :US forces withdrawing from Afghanistan despite continued violence

The only element of the Afghan peace plan going according to schedule is the withdrawal of American forces as the Taliban have continued their attack on soldiers and civilians and are not serious for intra-Afghan dialogues, Economist reported. ...

International :India's GDP could soar by 20 per cent post lockdown, predicts Goldman Sachs

India's Gross Domestic Product (GDP) could soar by 20 per cent in the third quarter of 2020, according to predictions by Goldman Sachs which have been stated by The Economist in a detailed story on Economic Lockdowns and their implications. ...

International :Job prospects for China's fresh graduates bleak as Red Dragon limps back to normalcy

As China limps back to normalcy after COVID-19 outbreak, job prospects in the country seem to be truly bleak especially for the nine million students or so who are due to graduate in June.The Chinese leadership has been fearing that the graduates wil ...

International :In COVID-19 lockdown, US reports surge in domestic violence

At a time when violent crimes, including murder, rape and assault, have plummeted owing some form of lockdown across the world to slow the spread of COVID-19, official figures cited by The Economist have shown a sharp rise in domestic violence--a cri ...

National :Stimulus, repo rate cut needed; as low demand stagnates growth

A combination of stimulus measures along with fiscal discipline is prescribed to reinvigorate India's economy which is ailing with low demand, receding production and stagnant wages. ...