It’s a fact that some major automotive manufacturers in India are facing a slowdown, whereas on the other hand; an accelerated recruitment drives are being conducted by the IT sector. Many leaders from Opposition parties have made critical remarks on the slowdown in economy growth.
The current economical situation suggests that, along with Automotive sector there are other 7 sectors facing a slowdown in conjunction with a Global slowdown. After demonetization (move to flush out black money) in 2016, cash-flow had reduced substantially, which many experts suggest that is a short-term scenario and will ultimately lead to fruitful results on a long run. The reduction in cash-flow is proportional to reduction in demand and further, reduction in demand is proportional to economic slowdown.
NBFC sector contributes to 50% – 60% of loans for commercial vehicles/private vehicles. In the year 2018, IL&FS one of the biggest companies of NBFC sector was closed down. This has a direct adverse impact on the Automotive sector, as one of the main contributor was closed down.
There are two main reasons for a slowdown/recession in any country namely, global factors and internal factors. Currently, an ongoing trade war between two biggest economies USA and China, has resulted in a global economic slowdown and uncertainties. The two nations are looking forward to resolve the trade war. However, the impact of current trade war has led to the yield curve of USA to get inversed. Historical recession data reveal that, on almost as many as last 9 occurrences of recessions, yield curve of the USA had inversed. If at all, USA heads for another recession then an impact is certain on India and globally as well.
When the last recession occurred during 2008-2009; India had better reserves compared to 2019. Currently, the foreign investment has also seen a sharp dip. India has two ways ahead to revive the economy, reduction in its fiscal deficit and slight ease in monetary policies to encourage liquidity to pump up the market.
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