Is there an economic slowdown in India? The hike in NPAs (Non-Performing Assets) and lowest downfall of GDP (Gross Domestic Products) in last six years, contributed tremendously in acceptance of this fact in country. According to the latest annual report of RBI, indian economy has hit a rough patch. This is a clear indication for tougher times ahead.
Which factors are responsible for economic slowdown in India?
There are several factors like:
- Loss of confidence in investments: Loss of confidence in investment makes customer stop buying and move into defensive mode. After the government decisions like demonetisation and GST, the buyer has put himself to this mode at very great extend. This, in return, has shut down retail sector of the country. SMEs (Small and Medium Enterprises) have failed to align their expenses with their profits.
- A stock market crash: The sudden loss of confidence in investing can create a subsequent bear market, draining capital out of businesses. In this way a stock market crash can cause a recession.
- Manufacturing orders slow down: Manufacturing orders slow down is directly proportional to recession. As, it means the manufacturing plants has to shut down their operations without orders. This is the clear indication of recession in the country. According to sources, a number of corporate giants have indicated the future of Indian market and expressed their worries in this regard.
- Deflation: When the prices fall over time, it has worse effects than inflation. Deflation reduces the value of goods and services being sold on the market. That encourages people to wait until prices are lower. This is one of the dominating factors in jewellery industry. People usually waits for the lower prices when they came to know about fall in prices of gold and silver.
How to overcome this problem?
There are various ways to solve this critical issue of the country. Such as:
- Government should levy tax according to actual capability of the business. When the costs of operating business are far more than the profits, businesses shut down. In order to save SMEs, the government has to think about alternative ways else we will lose small business in the country.
- Simplicity in documentation. Entrepreneurs opt to start their business where they can actually work on their ideas regardless of the country. The sad truth of our country is, legal formalities are too complicated too fulfil by a young entrepreneur; Hence he decides to settle in any other country, which leads to brain drain of the country.