Skip to main content

India's investment failed to pick up despite Modi's 4 years' reforms, manufacturing hit by demonetisation, GST: Crisil

By Our Representative
India's top consulting firm, Crisil, backed by its international partners, Standard & Poor, has regretted that four years after taking over the reins, and despite "a plethora of facilitations and reforms", the Modi government has "not been able to decisively push the investment cycle", insisting, "Investments have become the sore point of the Indian economy."
Crisil, in its report released last weekend, said, "The share of gross fixed capital formation, or fresh investment in the form of plant and machinery, dwellings and other buildings, etc., in GDP averaged 31% in the past four years (fiscals 2015 to 2018), compared with 33.6% in the previous five years (fiscals 2010 to 2014)."
Pointing out that the household sector "was the biggest contributor to investment in fiscal 2012 (share of ~45%)", Crisil said, "Since then, household investment has been on a consistent decline and its share in total investments was ~31% in fiscal 2017." It added, "Purchase of houses is generally the largest part (more than three-fourths) of household investment, so a slowdown in this factor is the key reason for the decline."
Underlining that "private corporate sector-led broad-based investment revival will have to wait", Crisil said, the immediate reason behind this is, being a "pre-election year, uncertainty can dampen/delay private investment." It added, "Election season is generally marked by uncertainties, both regarding change in regime and policy focus. Large investment commitments, especially by the private corporate sector, therefore, may be unlikely".
Pointing out that, because of slowdown in investment, manufacturing in India has failed to pick up, Crisil said, this has happened because of slowdown in domestic demand – both household consumption spending and investment spending – "in the four years through fiscal 2018 compared with the preceding five-year period."
Then, Crisil said, "Most of the slowdown post fiscal 2015 was seen after demonetisation. The cash crunch following demonetisation reduced private consumption growth. Within private consumption, rural consumption was particularly hit as farm realisations wilted during this period."
Slowdown in manufacturing, said Crisil, has also been caused by a fall in merchandise exports, which constitute about 14.4% of total merchandise export growth. It fell "significantly to 3.7% on-year on average in the four years beginning fiscal 2015 compared with 8.7% in the preceding five-year period. The drop came despite an improvement in world GDP growth and export volume growth in this period."
"In value terms", said Crisil, "The fall in India’s merchandise goods was sharper, with average growth between fiscals 2015 and 2018 at -0.2%, compared with 14% between fiscals 2010 and 2014. Within goods exports, manufacturing-related goods have also seen a slowdown in export growth. However, import growth of manufacturing related goods has increased during the Modi government."
Given this framework, suggested Crisil, the Modi government's target of manufacturing sector occupying 25% share in the economy by 2022, is unlikely to be met. To meet this target, it said, "manufacturing will have to grow at least 17.5% on-year, on average, between fiscals 2019 and 2022", while today the growth rate is less than half as much. "Even to raise the share to 20%, manufacturing will have to grow ast least 11% per year", it added.

Comments

Anonymous said…
Modi government's all round performance is failed
Anonymous said…
It’s a shrinking economy.

TRENDING

It's now official: Developed Gujarat's regular, casual workers earn less than 19 top states

By Rajiv Shah
Though not as low as state chief minister Vijay Rupani claims it to be (0.9%), Gujarat’s unemployment rate, at least as reflected in a recent report released by the Government of India, is 4.8%, lower than the national average, 6%. Yet, ironically, the same report, released soon after the Lok Sabha polls came to an end in May 2019, brings to light an even grimmer reality: Lower wages in "model" and "developed" Gujarat compared to virtually the whole of India, including the so-called Bimaru states.

Telangana govt proposes to give unfettered powers to forest officials, 'help' corporates

By Dr Palla Trinadha Rao*
The Telangana Government is contemplating to replace the Telangana Forest Act 1967 with a new law - the Telangana Forest Act (TFA) 2019, trampling the rights of adivasis ensured under the Scheduled Tribes and other Traditional Forest Dwellers (Recognition of Forest Rights) Act, 2006 (FRA Act 2006) and Panchayats Extension to Schedule Area (PESA) Act 1996 both of which are central acts.

Amaravati: World Bank refusing to share public grievances on Land Pooling Scheme

By Our Representative
A new report, prepared by the advocacy group Centre for Financial Accountability (CFA), New Delhi, has taken strong exception to the World Bank refusing to share its independent assessment of the Land Pooling Scheme (LPS), floated by the Andhra Pradesh government in order to build the new capital.

British companies export 'deadly' asbestos to India, other countries from offshore offices

By Rajiv Shah
“The Sunday Times”, which forms part of the powerful British daily, “The Times”, has raised the alarm that though the “deadly” asbestos is banned in Britain, companies registered in United Kingdom, and operating from other countries, “are involved in shipping it to developing nations”, especially India. India, Brazil, Russia and China account for almost 80% of the asbestos consumed globally every year, it adds.

RSS, Hindu Mahasabha were 'subservient' to British masters: Nagpur varsity VC told

Counterview Desk
Well-known political scientist Shamsul Islam, associate professor (retired), University of Delhi, in an open letter to the vice-chancellor of the Rashtrasant Tukadoji Maharaj Nagpur University, Dr Siddharthavinayaka P Kane, has taken strong exception to the varsity decision to include RSS’ “role” in nation building in the syllabus of the BA (history) course, citing instances to say that the RSS ever since its birth in 1925 with its Hindutva allies like Hindu Mahasabha led by VD Savarkar worked overtime to “betray the glorious anti-colonial freedom struggle”.

Beijing-based infrastructure bank 'funding' India's environmentally risky projects

By Our Representative
A new civil society note has questioned the operations of the Beijing-based Asian Infrastructure Investment Bank (AIIB), a multilateral development bank that aims to support the building of infrastructure in the Asia-Pacific region, seeking to fund projects in India through the Government of India’s National Infrastructure Investment Fund (NIIF), calling it “a risky venture”.

Include all workers exposed to silica dust in anti-TB programme: Govt of India told

Counterview Desk
In a letter, sponsored by well-known civil rights organization, Occupational & Environmental Health Network of India and signed by more than 60 professionals and activists*, Dr Harsh Vardhan, Union Minister of Health and Family Welfare, Government of India, has been told that Indian policy makers shouldn't just acknowledge higher TB risk to mine and stone crusher workers, but also “other silica-exposed workers”.

Govt of India 'lying': MGNREGA budget reduced by Rs 1,084 crore in 2019-20

Counterview Desk
NREGA Sangharsh Morcha, a well-known advocacy group for the rural jobs guarantee scheme, under implementation since 2005, has said that the statement by the Rural Development Minister has a made a mockery of the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) on the floor of Parliament, revealing the ruling BJP’s “anti-worker and anti-poor bias”.

Universal healthcare? India lacks provisions to 'fight' non-communicable diseases

By Moin Qazi*
Universal health coverage (UHC) -- ensuring that all people receive proper and adequate health care without suffering financial hardship -- is an integral part of achieving the Sustainable Development Goals. It enables countries to make the most of their strongest asset: human capital.

Govt of India seeks to 'subvert' autonomy of adjudicating authorities: RTI amendment

Counterview Desk
India's independent Right to Information watchdog, The National Campaign for Peoples’ Right to Information (NCPRI), in a statement, has said that the Government of India’s proposed amendments to the RTI Act to empower the Centre to unilaterally decide the tenure, salary, allowances and other terms of service of Information Commissioners at the Centre and States “seriously undermine” the law.