Economic survey of 2018 brings out a severe crisis in India due to investment slowdown. How this affects Indian Economy? Analyze.

Economic survey of 2018 brings out a severe crisis in India due to investment slowdown. This affects the economy very badly through a vicious cycle of reduced investments leading to

• Slow pace of Job creation.
• Increasing unemployment.
• Reduced demand in the market.
• Lower productions this impacting the Index of industrial production adversely.
• Lowers the revenue to the government.
• Reduced expenditure for infrastructural development.
• Reduced cost competitiveness.
• Declining exports.

These are the changes largely observed in the formal sector but the informal sector also faces adverse consequences. This is due to the fact that informal sector has a symbiotic relationship with the formal sector. And moreover the reduced investments impact the cash flow in the market. This has an adverse consequence on the informal sector which is driven by cash. The informal sectors ability to withstand shocks is limited. Therefore the industries operating in informal sector will face the fear of extinction.
Policy Implications:

• Crowding out effect as there would be interventions by the government to prevent the collapse of the economy.
• Increased fiscal deficit due to borrowing by the government.
• Impact on the current account deficit due to reduced exports.
• Depreciation of the currency.

Therefore reviving of the investments is a key for India’s developmental agenda and to ensure India reaps the benefits of demographic dividend and doesn’t witness demographic disaster.

Topics: GS-III: Indian Economy Issues Relating to Planning