Economic Indicators and Various Reports On It- GDP, FD, EODB, WIR etc

[op-ed snap] A deeper dark

Note4Students

From UPSC perspective, the following things are important :

Prelims level : Nothing much

Mains level : Moody's downgrade

Context

Data from the National Statistics Office showed that industrial production contracted by 4.3% in September — the lowest in the current series.

IIP movement

    • Over the course of the entire second quarter, the IIP has contracted by 0.4% after growing by 3% in the previous quarter. 
    • Of the 23 sub-sectors within manufacturing, 17 contracted in September.
    • This suggests that the contraction is deeper and more widespread. 
    • The worsening performance of the consumer durables, as well as the non-durables segment, is indicative of subdued household demand.
    • The capital goods segment contracted by 16.8% in the second quarter, indicating that investment activity continues to be depressed.

What it signifies

    • Data from the Controller General of Accounts shows that government spending picked up pace significantly after the Union budget was presented.
    • This wouldn’t have been enough to offset the subdued performance of other sectors. 
    • Various high-frequency indicators suggested that economic activity has slowed down considerably over the past few months. Growth may come in the 5% mark in the quarter. 
    • Even the government spending will not be available due to pressure on its own finances.
    • Transfers from the RBI can only partially offset the shortfall in both direct and indirect tax collections.
    • Even the disinvestment receipts remain well below the budgeted target.
    • Cuts in government spending are likely going forward, thus further accentuating the slowdown. 

Moody’s

    • Reflecting this deteriorating economic situation, Moody’s changed its outlook on India’s rating from stable to negative.
    • They cited increased risks that the country’s economic growth will remain “materially lower than in the past.”

Way ahead

    • Towards the end of this year, the headline growth numbers may pick up once the base effect kicks in. 
    • It would be a mistake to construe this as a sign of a recovery. 
    • The government needs to address multiple issues plaguing the economy. Along with measures to boost long-term potential growth, comprehensive measures are needed to address the stress in specific sectors such as telecom, real estate, and the financial system.
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