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Economic Indicators Show A Faltering Economy
On the first day of the Narendra Modi 2 government, economic indicators show that the economy is teetering. GDP data that came in was at a 5-year low, ensuring that we are now slower than China in terms of growth.
On the other hand, Unemployment rate in India, across urban and rural areas, stood at 6.1 percent between July 2017 and June 2018, according to the first Periodic Labour Force Survey of the National Sample Survey. This shows that the unemployment rate is now at a 45-year high.
The joblessness among males on all-India basis was 6.2%, while it was 5.7% in case of females. It also showed that the unemployment rate for males was higher at 7.1% in cities compared to 5.8% in rural areas.
Need to kick start the economy
The new government would need to kick-start the economy. High frequency data such as auto numbers are also poor. In fact, auto sales have been falling over the last several months in a row. The new government has already hit the ground running.
At its first meeting chaired by Prime Minister Narendra Modi, the Union Cabinet on Friday decided to extend the Rs 6,000 per year assistance to all farmers.
There was a decision to lift the cap on farmers with larger than 2 hectare plots of land. The Cabinet has also cleared plans to start contributory pension schemes to cover small and marginal farmers as well as traders above the age of 60. This is likely to boost the rural economy and provide some impetus.
According to reports, the Union Budget would now be declared on July 5 and the government is likely to put forward measures that were already announced in the Interim Budget. Among these would include tax exemption limit being raised to Rs 5 lakhs.
Stock market remains upbeat
The Indian benchmark indices have gained substantial ground in the last few weeks and are at near record highs of 40,000 points. They seem to be discounting all the bad news, as liquidity continues to flow into mutual funds and through Foreign Portfolio Investors. This may not sustain for long and at some stage we might see some selling pressure if the economy is not back on track.
Investors are therefore advised some degree of caution. All eyes would not be on the Union Budget, though nothing much can be expected, given that the recommendations of the Interim Budget that was delivered earlier in Feb, might be carried forward.
