Missing demand: on economic slowdown
Mains Paper 3: Economy
Prelims level: Society of Indian Automobile Manufacturers
Mains level: Economic growth and development
- A welter of data collectively and individually point to one worrying
conclusion: economic momentum across sectors is slowing in the widening
absence of that key ingredient, demand.
- Domestic sales of cars, commercial vehicles and two wheelers all
contracted in April, from a year earlier, the Society of Indian Automobile
Manufacturers (SIAM) has reported.
- The decline of almost 16% in total automobile industry sales is an
indication that consumption demand across markets urban and rural,
institutional and individual is petering out.
- While sales of commercial vehicles, a fair proxy for overall economic
activity, slid 6% last month, a 16.4% drop in demand for two-wheelers
extended the segment’s slump into the new financial year, mirroring the
rippling rural distress.
Analyzing the data on declining
- The data on passenger vehicles, which saw the steepest drop in almost
eight years, add to the gloom.
- Car sales shrank almost 20% amid a protracted slump that shows no signs
of a reversal.
- The latest industrial output figures from the government serve to
underscore the widespread nature of the demand drought.
- The Index of Industrial Production (IIP) for March shows output fell
0.1% from a year earlier to a 21-month low, with the use-based
classification revealing a weakening that spared none of the six segments.
- The capital goods sector shrank by 8.7% on the back of an 8.9%
contraction in the preceding month.
- Output of consumer durables fell 5.1% from a year earlier, and growth in
consumer non-durables production slid to 0.3% from the 14.1% pace in March
- Manufacturing, which has a weight of almost 78% in the index, continues
to be the biggest drag, with output contracting by 0.4% after shrinking by a
similar extent in February.
- Overall, the sector’s growth slowed to 3.5% in the last fiscal, from
4.6% in 2017-18. The composite picture that emerges from all these numbers
belies the CSO’s implicit fourth-quarter
GDP growth assumption of 6.5%, and paints it as overly optimistic.
- With global headwinds strengthening in the backdrop of an escalating
trade war between the two largest economies, the U.S. and China, and rising
tensions in West Asia beginning to push up energy costs from the top
oil-exporting region, Indian policymakers have to contend with an external
sector that would likely only add to the domestic pressures, most certainly
in the near term if not in the longer.
- The distress in the farm sector may just ease marginally if the monsoon
does turn out to be “near normal” as forecast last month, and could help
spur a demand revival in the rural hinterland.
- Still, the new government that emerges after May 23 must spare little
time in drawing up appropriate policy measures that not only help
reinvigorate demand but also ensure that such a revival is robust,
across-the-board and enduring.
Q.1) Consider the following statements about the UNDP Small Grants
1. It provides direct financial and technical support to communities and
civil society organizations for projects that conserve and restore the
2. The program is funded by the Global Environment Facility (GEF).
3. Centre for Environment Education is its National Host Institution in India.
Which of the statements given above is/are correct?
(a) 1 and 2 only
(b) 2 and 3 only
(c) 1, 2 and 3
(d) 1 and 3 only
Q.1) Slowdown has widened across sectors; the new government must hit the ground
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