The global economy is currently in the middle of turmoil due to a wide range of factors. Two of the world’s biggest economies, the United States and China, are locked in a bruising trade war, while Europe’s biggest economy, Germany has experienced a downturn. However, among all that it is perhaps being overlooked that India, which is one of the world biggest economies in itself, has entered a slump over the past quarters. Despite the fact that Prime Minister Narendra Modi was reelected with a massive majority in May, the economic situation has experienced a sluggish pace so far. In a new development, investment banking giant Goldman Sachs has stated that the economic pain might not be over for India anytime soon.
The report from Goldman Sachs comes after the Indian government had announced a stimulus package in order to recharge the economy. However, it is quite clear that those moves have not been particularly well received by the investment community. The report, which is titled India’s Economic Slowdown, has been prepared by Goldman Sachs’ Asia Pacific chief economist Andrew Tilton. In the report, Tilton stated that underwhelming fiscal policies and global factors would continue to be a drag on the economy over the coming months. Tilton wrote,
The risks to our outlook for economic activity for FY20 continue to be tilted to the downside, given the continued weakness in consumption indicators, and persistent confidence concerns emanating from NBFCs that the Goldman Sachs India Financials equity analysts have pointed out.
The Indian economic slowdown has been a matter of intense public debate in India over the past month or so and the latest report from Goldman Sachs will come as another blow for the government. Consumption has slowed down across many sectors, and business leaders across a range of industries have spoken about the slowdown in domestic for even everyday items like biscuits and toothpaste.
More importantly, the automobile sector in India has been in a damaging slump, and there are fears that there could be thousands of layoffs in the coming months. The automobile sector is often regarded as a bellwether of the state of the Indian economy. However, the Goldman Sachs report stated that the problems could be deeper. Tilton stated,
Automobiles contributed 17 percent of the total slowdown, as against a 36 percent contribution by other consumption-driven factors including bank agriculture credit, vehicle sales, rural wages, fuel consumption, farm exports, fertilizer sales, rail/air passenger traffic, household credit, and electronic exports.