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Consumption has extended India’s economy for a long time, hence its fall is the cause of alarm

Two new figures released in the last few days show that the Indian economy is seeing a slowdown in the demand for consumption. Automobile sales declined 17 percent in April compared to a year earlier.
Secondly, consumers ‘fast-moving consumer goods’ or FMCG companies – who sell biscuits and shampoo and other consumer products – are also surprisingly weak. His sales have been quite stable in the past, and this region has been a reliable source of boom for the economy.
The slowdown in demand is due to the combination of the situation of the weak business cycle coupled with financial stress. For example, loans from banks and non-banking financial companies (NBFCs) are important for both automobile buyers and dealers who have a list of automobiles. The problems of NBFC sector have weighed both types of buyers.
Automobile sales data in India shows the sale of automobile to dealers by large companies, not selling in homes by dealers. Earlier reports had suggested to build an inventory with car dealers in 2018 after Diwali. This will necessarily cause buyers to reduce their purchases and it is visible in 2019. There is a decrease in the production of manufacturers who reduce the sales of cars, the possibility of cuts, the purchase of automobile components, and its impact across the country.
The main components of demand in an economy are private consumption, investment, net exports and government expenditure. Let us examine each of them separately.

Investment

Strong private investment is important to ensure the strong performance of the Indian economy, especially in the private sector, almost all jobs are created. For many years, in the beginning of 2011-12, the Indian business cycle was slowing due to the demand for weak investment. This decline in investment did not start immediately after the global financial crisis, but with an interval.
In spite of efforts to reduce the halted projects, in order to sanction infrastructure projects and speed up the process of permissions, the business environment remained uncertain, obtaining financing was difficult, and the firm suffered poor profitability and capacity utilization. went.

Export

At the same time, export growth was particularly low during this period, and negative in some years also. Thus there was no engine of export growth which they were in the early 2000s.
Moving forward, a global business downturn is a risk because of the US-China trade war. The slowdown in the global trade will be bad for the Indian economy.
Although some experts have hoped that India can move to China’s shoes in the global manufacturing sector, but India is not in a position to take advantage of it. India has a lot of presence in the automobile supply chain and it can grow rapidly in China’s expenditure but is absent in most other areas including electronics.

Consumption

Consumption demand, which is the most stable part of the well-organized overall demand in recent recession years. At such a time when exports and investments were running poor, the economy continued to grow fast in the economy. This is the reason that the latest data on the demand for falling consumption is a matter of concern. An engine of growth that the economy has trusted in recent years can also be a threat to recession.
There is concern about rural demand. Less food inflation means less income growth in the farm sector. In recent years there has been an increase in employment in agriculture, whereas revenue has stagnated, thus there is hindrance of per labor income. At the same time, due to the lack of outreach of banks for the durable goods in rural India, the banks were more dependent on NBFC instead of banks. As a result of the NBFC crisis, the purchase of durable goods financed by the credit has been contracted.
Compared to agriculture, there is much more in rural economy. Informal firms are engaged in food processing, manufacturing and services. One concern is that these firms will be hurt by remonstrance. Informal manufacturing and services, construction, real estate, trade and money lending, where transactions were dependent on cash, were potentially hurt.
There is a debate between discussions on jobs and discussions on consumption demand, as well as to what extent there is a problem in the labor market. Earlier, the demand for strong consumption was a factor which was incompatible with the claim that job growth is stable. However, if we see a picture with a weak consumption increase, then it is more consistent with the sense that there is also problem in the labor market.

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