Economic growth declined to just 4.5% in the second quarter (April-September) of 2019-20 at constant prices, showing a falling trend for the sixth consecutive quarter, according to fresh data released on 29 November 2019 by the Ministry of Statistics and Programme Implementation (MOSPI). Even as the finance minister Nirmala Sitharaman tried to put up a brave face claiming that it is still not a full blown recession, this will have little value to the people of the country. Declining growth means immense pain because jobs decline, earnings decline and, for the vast majority of Indians who live on the edge, it means a blow to their already miserable living standards.
If you look at the fine print, things are even more scary. Agriculture, forestry and fishing – the largest employing sector – grew at a measly 2.1%. Manufacturing sector actually declined by 1% after growing at just 0.6% in the previous quarter. Construction grew by just 3.3%, trade, hotel, transport etc. grew by 3.8%. The only sector that has shown a decent growth rate is the public administration, defence and other services sector which steamed ahead with a growth of 11.6%.
Meanwhile, the crisis is further aggravated by the relentless and continuous rise in jobless people. This trend is continuing from before the current slowdown because it is an expression of much deeper systemic faultlines. But the slowdown has given it a fillip, raising unemployment rate to a staggering 8.5% in October this year compared to 6.7% one year ago, according to CMIE data. [See chart below]
Another bit of bad news also emerged yesterday – and it was not surprising. The Ministry of Commerce released data on growth in eight industries, known as the core sector. These are: coal, crude oil, natural gas, petroleum refinery products, fertilizers, steel, cement and electricity. As the Chart below shows, year on year growth crashed to -5.8% in October this year. This follows a -5.1 growth in September. Except for a small uptick in July, core sector output has been decelerating since March this year.
In fact, the flagging core sector lies at the heart of the declining Index of Industrial Production (IIP) which gives a measure of the way industrial production is changing in the country. IIP data, released by MOSPI, is available till September this year and shows a steady decline since July this year. In September IIP declined by 4.3% year on year, following a 1.4% decline in August.
Again, the fine print reveals a darker picture. Manufacturing component declined by 3.9% while the mining component declined by a whopping 8.5% in September. Specifically, manufacture of fabricated metal products (except machinery and equipment) crashed downwards by 22%, rubber and plastic products by 12.6%, computer, electronic and optical products by 10.6% and machinery and equipment (nec) by 18.1%. It is expected that October IIP results, to be released shortly, will continue in the same direction, that is, downhill.
All these figures show an undoubted slowdown in the economy, despite denials and prevarication by the government. The Modi govt. dream of achieving a $5 trillion economy has been given an ignominious burial by hard reality. In fact, the slowdown is being used by corporate lobbies to wrest more and more concessions from a clueless govt., which continues to believe that helping the corporates will kickstart the economy. This typically myopic dogma, which is being fought against on the streets of Chile and Lebanon and many other countries today, has led the Modi govt. to cut corporate tax, offer huge funds to stricken sectors like construction, destroy protective labour laws so that hiring and firing becomes easier and curtail its own expenditure on welfare programmes. It is a recipe for disaster and the recent electoral reverses for the BJP, just months after its resounding victory in the Lok Sabha polls in May, shows the fast eroding support for it.