Why there is slow down in India’s economic growth?

Growth slumps to 4.5%:

At 4.5% growth rate in last quarter was slowest in last 6 years. The bigger question is whether it is the bottom or will it fall further. Debates are going on Television but the two debates I listened missed a few points. All the talk about fiscal stimulus and monetary policy is fine but human behaviour is even more important. The fundamental aspect is that the structure of economy of India is fundamentally different. 80% of economy is enterpreneurship and almost informal. The companies listed in share market, limited companies, registered LLP etc are just balance 20%. No country has this structure. Now that fact is established, let me list my three points:Flood:The last quarter saw flooding in low lying areas of nearly all big states. It was the worst flood in 25 years. Flood do affect economy. It lowers consumption. It slows down manufacturing. Mining activities are worst affected by floods and accordingly mining saw negative growth.

What drove growth:

Present level of growth is the same as in 2013-14. So what did this Government do to boost it to 7% and 8% in the successive years? Any ideas? See these numbers:

100,000,000 multiplied by 12,000

20,000,000 multiplied by 200,000

50,000,000 multiplied by 1000

The above are the number of money pumped into economy is past 5 years. First is the 100 million toilets. Second is loan to 20 million houses. Third is 50 million LPG stoves.

It was the classic economic recipe which is given in Economic Books. Pump money and boost demand.

These projects are nearing completion. Hence slow down or back to normal.

NPA or India’s sub prime crises:

India is undergoing crises in Banking and it is of mammoth proportion. It is called bad debt. See the number

1,000,000 multiplied by 10,000,000

The Finance Minister has explained that about 20% of this has been recovered during bankruptcy proceedings. Rest is under process.

The fact that Government has not issued a white paper which it could use during elections corroborates the fact of magnitude of problem.

Now the industries which are under bankruptcy proceedings, can not be expected to grow or boost manufacturing. Look at mammoth number one again. It is Ten lakh crores. Many of these industries may have been shut down.
The second shoe problem:The above are three tangible problems. But there is a psychological problem. The last Government went to elections with big bang reforms waiting to happen for several decades like Demonitisation, GST and Reservation in Jobs for poor. But in this term the Goverment disposed off its 7 decade old manifesto in a month. Triple Talaq is Gone. So is special status of Kashmir.

The entrepreneurs who run 80% of economy have slowed down waiting for the proverbial other shoe to fall. They are not expanding or starting new projects. They are waiting for more reforms and improvement in Governance. It is a pause.

None of those debating the issue are even refering to any of above glaring facts.

A superficial TV debate:

This TV debate is more in-depth:

As regards me, I am optimistic in long run. A contract for third International Airport in NCR has been awarded and shall be completed by 2023. About 170 new airports are being spruce up. 400 Boeing planes have been ordered. Two defence production corridors are being built. Not to mention two new expressways underway and new rail tracks, trains and waterways etc. are coming up.

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