In an interview to BusinessLine, former Prime Minister Manmohan Singh said that “it was the blunder of demonetisation, followed by the faulty implementation of GST, that triggered this (economic) slowdown.”
“In my estimate, it will take a few years to get out of this slowdown, provided the government acts sensibly now. We must not forget though, that it was the blunder of demonetisation, followed by the faulty implementation of GST, that triggered this slowdown. RBI has recently put out data that shows that gross bank exposure towards consumer goods loans has seen a steep and constant decline since late 2016 — that is, following demonetisation. Essentially, this data demonstrates the demand-side problems facing the Indian economy,” Singh said.
Singh said that the Modi government needs to address the issue in a transparent manner but that he fails to see a focussed approach from this government.
“I believe that we are entering a different kind of crisis now, a prolonged economic slowdown that is both structural and cyclical. The first step in a crisis is to acknowledge that we are facing one,” he emphasised.
“The government needs to address the issue in a transparent manner, listen to experts and all stakeholders with an open mind, and project serious intent to handle the crisis, Singh said, adding, “The government must instil confidence in the people and send a message to the world. Unfortunately, I do not yet see such a focussed approach from the Modi government,” he added.
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He further said that the government can no longer be in denial about the Indian economy.
“India is in the midst of a very worrying economic slowdown. Last quarter’s GDP growth rate of 5 per cent is the lowest it has been in six years. Nominal GDP growth is also at a 15-year low. This slowdown has affected multiple key sectors of the economy,” he said.
“The automotive sector is in a crisis with a drastic decline in production. Over 3.5 lakh jobs have already been lost. Automotive hubs such as Manesar, Pimpri-Chinchwad and Chennai are experiencing a lot of pain. The ripple effects are now being felt across other allied industries. Even more worrying is the slowdown in truck production, which is a clear indicator of a slowing demand for goods and essential commodities. The overall slowdown has taken a toll on the service sector as well, which has experienced a slowdown in job creation since earlier this year,” he added.
He further said that the real estate sector has not been doing well for some time now, which, in turn, is affecting allied industries such as bricks, steel and electricals.
“The core sector has slowed down following a drop in the production of coal, crude oil and natural gas. The rural economy continues to suffer from inadequate crop prices. Unemployment is at a 45-year high for 2017-18. The overall situation is dire,” he said.