In 2020, the economy could be taking signals from your wallet
NEW DELHI: While the government focused on political things in 2019, the economy It has been struggling with growth close to the minimum of six years. Will 2020 be better? Maybe, but not the first half. After a series of reductions in India's GDP growth estimates, including the RBI, last year, the first major 2020 reduction will come from the International Monetary Fund this month.
How The second budget of the Minister of Finance, Nirmala Sitharaman, on February 1, will not only explain her policy options, but will also indicate whether the measures taken last year to revive growth have had any effect or not. Budget objectives based on overly optimistic economic conditions in the future may also mean unfulfilled objectives next year.
Deceleration Tax? The decline in GDP growth has affected GST collections. The Center is supposed to compensate states that do not see at least 14% annual growth of GST until 2022, but it is likely that this year it will not reach Rs 60,000 million. Therefore, do not be surprised if the GST Council increases the rates of some products this year.
Who but you? There are three big drivers of the economy — consumption, investments and exports. A muted global demand means exports aren't going up anytime soon. Coming to investments, India Inc, which is operating at well below 70% of its capacity because of low domestic demand, is unlikely to make new investments in a hurry either.
That leaves the government to do the heavy work, but it also has to monitor the fiscal deficit. That means that any economic recovery will depend largely on how you, the consumer, behave.
Private consumption contributes with almost 60% of India's GDP and its collapse is said to be the main reason behind the current economic slowdown. The recovery of consumption is important for investment and, therefore, GDP growth will recover.