THE GIST of Editorial for UPSC Exams : 16 MAY 2019 (Missing demand: on economic slowdown (The Hindu))

Missing demand: on economic slowdown (The Hindu)

Mains Paper 3: Economy
Prelims level: Society of Indian Automobile Manufacturers
Mains level: Economic growth and development

Context

  • 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 2018.
  • 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.

Way forward

  • 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.

Conclusion

Prelims Questions:

Q.1) Consider the following statements about the UNDP Small Grants Programme:
1. It provides direct financial and technical support to communities and civil society organizations for projects that conserve and restore the environment.
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

Ans: C
Mains Questions:

Q.1) Slowdown has widened across sectors; the new government must hit the ground running. Comment.

HOT! UPSC GS STUDY Kit Offer (1000/- Off)

Call Us at +91 8800734161 (MON-SAT 11AM-7PM)