What is the macroeconomic dilemma faced by the new Indian Government?
There is an evident deterioration in the macroeconomy of the country spiralled by a slowdown in the consumer economy and a widening of the deficit in trade. The facts are reinforced by price signals, the slowdown in vehicle sales and even weakening of air traffic. This also shows a weakening purchasing power among the masses. The only bright spot is the slowdown in inflation. Weak demand in rural areas is caused due to slow rural wage growth. The slowing consumer demand has also affected the top businesses. The demand in the industrial sector has fallen due to a hit to consumer sentiment. Although the credit growth of the banks is good there is an evident liquidity crunch seen in the NBFCs. A rise in the import bill has widened the trade deficit of the country. The fluid geopolitical situations have continued to maintain pressure on the oil prices thus showing that the twin deficits both fiscal and current will remain under pressure. India needs to push its exports to bridge the trade deficit. Thus, the whole macroeconomy is in a turbulent state and presents many tough choices to the new government.
Published: June 12, 2019 | Modified:December 1, 2019