India’s economy continues to decelerate with the government’s estimatefor first-quarter gross domestic product pegging growth at a 13-quarter low of 5.7% in April-June. The reasons for the protracted slowdown — a slide of five straight quarters from 9.1% in March 2016 — are many and varied. But there is little doubt that the demonetisation exercise combined with the uncertainty around the July 1 adoption of the new indirect tax regime served to significantly dampen economic activity.
While the GST-related “inventory deaccumulation” that Chief Statistician T.C.A. Anant referred to may well be reversed in the current quarter as companies across sectors gain comfort with the new tax regime, it is still doubtful whether demand for industrial output is going to attain any meaningful strength. The Reserve Bank of India last month said that its industrial outlook survey had “revealed a waning of optimism in Q2 about demand conditions across parameters and especially on capacity utilisation, profit margins and employment.” A look at the sector-specific trends shows that manufacturing expansion in gross value added (GVA) terms has slackened to a near stall at 1.2%. This, from 5.3% in Q4 of the last fiscal and 10.7% a year earlier, is a far from heartening sign. With capacity utilisation expected to weaken this quarter, according to the RBI, and with surveys suggesting that consumer sentiment has deteriorated steadily in August, the auguries for a demand rebound are far from promising.
While expressing concern about the slower-than-expected expansion, the Finance Minister has acknowledged that the challenge before the government now is to work out both policy and investment measures to boost momentum. One option would be to suspend the fiscal road map for a limited period in order to pump prime the economy through increased capital spending by the government. The risks of fiscal loosening are of course manifold, especially at a juncture when several State governments have either announced or are contemplating large-scale farm loan waivers, which would push up interest rates and crowd out fresh lending. Still, there is a thin sliver of a silver lining in the GDP data. The services sector continues to remain buoyant. Quarterly GVA across this broad swathe that encompasses trade, hotels, transport, communication and broadcasting accelerated to 11.1%, from 6.5% in the fourth quarter, faster than the 8.9% posted in the corresponding period last year. The civil aviation sector saw passenger traffic soaring by 15.6%, and construction activity, a provider of jobs, also ticked up by 2%. The Finance Minister has his task cut out: to find ways to restore momentum before the tailwinds of low inflation and affordable energy prices start reversing direction.
– Decelerate: reduce speed; slow down.
Example: International growth rates decelerated in the early 1970s
Synonyms: slow down, slow up, ease up, slack up, reduce speed
– Peg: fix a price, rate, or amount at a particular level.
Example: A student loan starts accruing interest from the moment it is borrowed, but the interest rate is pegged to the retail price index.
Synonyms: hold down, keep down, fix, set, hold, freeze
– Protracted: lasting for a long time or longer than expected or usual.
Example: A protracted and bitter dispute
Synonyms: prolonged, long-lasting, extended, long-drawn-out, spun out, dragged out
– Uncertainty: the state of being uncertain.
Example: Times of uncertainty and danger
Synonyms: unpredictability, unreliability, riskiness, chanciness, precariousness
– Adoption: the action or fact of adopting or being adopted.
Example: She gave up her children for adoption
– Dampen: make less strong or intense.
Example: Nothing could dampen her enthusiasm
Synonyms: lessen, decrease, diminish, reduce, moderate, damp, put a damper on
– Attain: succeed in achieving something that one desires and has worked for.
Example: Clarify your objectives and ways of attaining them
Synonyms: achieve, accomplish, reach, obtain, gain, procure, secure, get
– Optimism: hopefulness and confidence about the future or the successful outcome of something.
Example: The talks had been amicable, and there were grounds for optimism
Synonyms: hopefulness, hope, confidence, buoyancy, cheer
– Deteriorate: become progressively worse.
Example: Relations between the countries had deteriorated sharply
Synonyms: worsen, decline, degenerate, fail, slump, slip, go downhill
– Augury: a sign of what will happen in the future; an omen.
Example: They heard the sound as an augury of death
Synonyms: omen, portent, sign, danger sign, foretoken
– Manifold: many and various.
Example: The implications of this decision were manifold
– Contemplate: look thoughtfully for a long time at.
Example: He sat on the carpet contemplating his image in the mirrors
Synonyms: look at, view, regard, examine, inspect, observe, survey, study
– Buoyant: cheerful and optimistic.
Example: The conference ended with the party in a buoyant mood
Synonyms: cheerful, cheery, happy, lighthearted, carefree, bright
– Swathe: wrap in several layers of fabric.
Example: His hands were swathed in bandages
Synonyms: wrap, envelop, bind, swaddle, bandage, cover, shroud
– Tailwind: a wind blowing in the direction of travel of a vehicle or aircraft; a wind blowing from behind.
Example: A tailwind had brought the aircraft into the airport quicker than expected.