Need For Urgent Measures For Building Resilience To Bail Out Sagging Economy

Slowdown in Indian economy is once again hitting the headlines. There are several indicators of slowdown in the economy across different segments. Before we delve deep into the real economic scenario prevailing in the country, it is important to understand certain factors that influence the economy.

- Sumitra R

Economic Recession & Slowdown

An economic recession signifies a drop in Gross Domestic Product (GDP), whereas a slowdown indicates decline in rate of growth of Gross Domestic Product (GDP). The GDP is the total value of all the goods and services produced or created in a country in a year. Generally, slowdown precedes recession but the reverse may not be always true.

An economic recession indicates decline in spending by customers this decreases production, as company tries to match the output with the demand. The decline in output leads to lays off and raise in unemployment.

In slowdown, though the GDP remains in increasing trend but the rate of growth of GDP remains less than the previous year. Countries like India and China are facing a slowdown presently that is evident from the GDP trend.

It is evident from the above figures that rate of growth of GDP in India is showing a declining trend. Slower growth rate was evident in household spending and gross fixed capital formation. Amid the slowdown, Moody's investor's service has cut India's GDP growth rate to 6.2% for the calendar year 2019 against its earlier projection of 6.8 percent. Industrial production is lowest in India in the past three years, subdued corporate results; reduced private investments etc are indicators of sluggish economic scenario.

Consumption an Important Tool for Economic Growth

Consumption reflects growth and prosperity of economy. Decline in consumption may arise due to any of the reasons like increase in unemployment, high inflation, high rate of interest, high tax rates, slow growth in disposable income etc.

Reduction in consumption expenditure directly impacts economy as it reduces the demand for products that in turn reduces production and entire business cycle.