Stodgy private consumption contributes to India’s sluggish economic growth
India’s third quarter economic growth numbers are set to be made public today.
India recently lost its place as the world’s fastest growing economy, and the second quarter of 2019 saw GDP growth fall to 5%. Owing to further slowdowns in private consumption amid a multi-year low of new project announcements, growth is expected to drop to 4.3% this quarter.
Weak consumer demand has consistently plagued the market, leading to capital goods and consumer goods (durable and non-durable) slowing down in production activity. Additionally, credit growth has remained sluggish throughout the year, with high direct and indirect tax rates acting as spending buffers to domestic consumers. Though he maintains a poor relationship with them, Prime Minister Narendra Modi is under pressure to work with private investment firms.
Modi has blamed the slowdown on external factors but promised to speed up growth while on the campaign trail earlier in the year. This has not yet occurred, and a further drop in real GDP growth will increase calls for aggressive demand stimulus measures in the auto, real estate and manufacturing sectors, which are all suffering from demand crises.
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