INTRODUCTION

The crisis brewing within the Indian economy has gained unanimous acceptance by now.
Even the latest annual report of the RBI for the fiscal year 2018-19 (or FY19) confirmed that
the Indian economy has indeed hit a rough patch. The GDP growth rate of the economy has
slipped to 5 per cent in the first quarter of FY20, the lowest in over six years. This is an
indication of tougher times ahead. Be it the recent collapse of the automobile sector or the
rising number of non-performing assets (NPAs), ..

The spurt in instances of job losses from automobile manufacturers to biscuit makers has led
to the general acceptance of the downturn. This is the third instance of an economic
slowdown for India in the past decade after the ones that began in June 2008 and March
2011. The technical term for the same is growth recession. A recession is defined in
economics as three consecutive quarters of contraction in GDP. But since India is a large
developing economy, contraction is a rarity. The last instance of negative growth for India
was in 1979. A growth recession is more commonplace where the economy continues to
grow but at a slower pace than usual for a sustained period, what India has been facing
nowadays.

The growth of the Indian economy had been predominated by consumption inclusive of both
-- Private Final Consumption Expenditure (PFCE) as well as the Government Final
Consumption Expenditure (GFCE). Over the last five years, the total consumption
expenditure by Indian households had accelerated with an average growth rate of 7.8 per cent
compared to an average of 6.1 per cent in 2011-14. But the recent sharp fall in PFCE in the
June quarter to 3.1 per cent compared to 7.2 per cent in the March quarter has significantly
contributed to the recent slowdown.

That being said, any fall in consumption expenditure, as and when it would happen, would
escalate the crisis even more. If consumption spending falls, then output and employment
levels also fall since consumption expenditure directly impacts the other two. As a
consequence, the economy would stagnate, and prices deflate. Lower prices, if unable to
recover the costs, would halt the operations of any firm and would initiate the layoff process.
This, in turn, reduces earnings further. Hence this vicious cycle keeps on repeating itself until
the economy slips into a deeper state of shock.

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In addition, another major component of India's GDP is investment, induced by both --
private and government sectors. It has been a key driver of growth since the liberalisation of
1991. Though gross fixed capital formation (GFCF), the main constituent of investment in
the economy, increased, yet its contribution to growth fell by 6.2 percentage points in 2014-
19 than in 2011-14. The slackening of investment lowers the level of infrastructure
development, causes hesitation in creating small businesses, stop entrepreneurs from
investing in research and development, and thus stagnates technological development. Capital
Investments are long-term gains that generate profitability for many years by improving
operational efficiency and boosting innovation. It goes without saying that for holistic growth
of the economy and to gain competitive edge over others, the economy must innovate.

In addition to these factors, the slump in the economy is also affected by the various
exogenous factors. A leading dampener is the US-China trade war, which has intensified over
time and has contracted world trade and, in turn, Indian exports. Also, high rates of GST,
liquidity crisis in NBFCs, and shift in the behavioural pattern of the workforce due to the
entry of young people has discouraged savings. When people save less in the economy, it
leaves less money for investments.

Recession can be short-lived if corrective actions are taken immediately, failure of which can
have a prolonged effect on the health of an economy. Amidst the news of slowdown, rise in
FDI inflows from $12.7bn (FY19) to $16.3 bn (Q1 FY20) brought respite for the
government. In a welcoming move, government revised GST for the automobile sector,
opened up FDI in contract manufacturing sector and even announced the recapitalization of
the banking sector. Together with these, it should also focus on optimum utilization of funds
granted by RBI and direct them to boost investment in the economy both infrastructural and
research investment. Further, structural shifts over the long run can be achieved through
tapping into the health and education sectors that long for quality improvements. Only such
long-lasting structural changes can improve the growth potential of the Indian economy and
deter the possibility of three slowdowns within the short span of a decade.

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The Global Economy

 A weakening of global economic activities.

 Heightened uncertainty emanating from trade and geopolitical tensions.
 A slowdown in the industrial production of advanced economies (the US, Europe, and
Japan).
 Reduction in the manufacturing activities, the lowest in a decade, and slow down in
hiring rates by the private sector.
 The macroeconomic performance of major emerging market economies has slowed
down and can affect retail sales and industrial production growth (Chinese, Russia,
Brazil, and South Africa).
 Crude oil prices disruptions due to geopolitical conflicts.
 Protectionist policies across the globe have been worsening the global growth process.
 The US-China Trade War.
 Worsening of bond yields due to the European Central Bank’s cut in the deposit rate.

The Domestic Economy

 A slowdown in the Private Final Consumption Expenditure (PFCE) to an 18-quarter

low.
 On the supply side, the Gross Value Added (GVA) growth decelerated to 4.9% in Q1:
2019-2020, pulled down by the manufacturing growth.
 Growth in the services sector was stalled by the construction sector.
 The initial delay in the onset of the south-west monsoon.

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  Industrial activity, measured by the Index of Industrial Production (IIP), weakened in
July 2019.
 The contraction of production of capital goods and consumer durables.
 The rise of food inflation and fuel prices into deflation
 In Q2, merchandise exports remained weak in July and August 2019, caused by lower
shipments of engineering goods, petroleum products, gems and jewellery and cotton
yarn.

NEED OF THE STUDY

Slowdown in growth due to endogenous and exogenous factors, said Chief Economic
Adviser K.V. Subramanian after GDP data release.
"Given the indications we have seen in the past few months, growth was expected to be slow.
However, 5% is far below street estimates of 5.6%-5.7% and does come as a surprise. This
was primarily driven by lower growth in private consumption. Manufacturing growth staying
almost flat is also worrying and immediate steps are needed to revitalise this sector. An
overall recovery may take another couple of quarters as the NBFC sector is still recovering
from the liquidity crisis," Gourav Kumar, principal research analyst at fundsindia.com,
Chennai, told Reuters.
A host of high frequency indicators like auto sales continue to weaken. Domestic passenger
vehicle sales in July dived at the steepest pace in nearly two decades and declined for the
ninth straight month in July. In addition, the risk of further escalation of the US and China
trade war are weighing on demand and business confidence in India.

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SCOPE OF THE STUDY

With the Modi government coming into power with an overwhelming majority, the nation
expected a public-friendly and pro-growth Union Budget 2019. India’s first full-time lady
Finance Minister presented the second term full-fledged Union Budget 2019 and aimed to
boost infrastructure and foreign investment against the backdrop of a slowing economy, weak
consumption demand, rural distress, high unemployment, and lack of private investment. The
Union Budget 2019 aims to change gears and put India on a fast forward mode to spur
growth and development.

The world economy is slowing down with anti-globalisation sentiment, protectionism,

nativism and trade wars. India continues to take giant strides forward and has also managed
to become the sixth largest economy by sustaining growth rates higher than China, and also
one of the fastest growing economy in the world.

The Economic Survey 2018-19, imbued with the ‘blue sky thinking’ approach, forecasts a
positive GDP growth rate of 7 per cent for FY19-20 while expecting general fiscal deficit to
be at 5.8 per cent. The Survey also opined that India should accelerate and sustain a real GDP
growth rate of 8 per cent to become a USD 5 trillion economy by 2025.

The public sector banks are now proposed to be provided INR70,000 crore capital to boost
credit for a strong impetus to the economy. In order to harness the prowess of India as a more
attractive FDI destination, the government will invite suggestions for further opening up of
FDI in aviation, media, and animation and insurance sectors in consultation with all
stakeholders. 100 per cent FDI will be permitted for insurance intermediaries.

The Union Budget 2019 has also laid emphasis on closure of existing litigation. To liquidate
past disputes under Central Excise, Service tax and Cesses “Legacy Dispute Resolution
Scheme” is proposed which grants waiver from 40 per cent to 70 per cent of the disputed tax
amount. Further, this scheme provides relief from payment of interest, penalty and protection
from prosecution.

The budget provisions aim to balance priority and give directions to the economy. However,
the proof of the pudding would be in the action that the government actually takes to ensure
implementation such that people’s expectations and India’s objective of more inclusive
growth is met.

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OBJECTIVE OF THE STUDY
The MPR, in its first chapter, Macroeconomic Outlook, explains that the slowdown in the
economy started in 2018-2019 and has further extended to the first half of 2019-2020 due to
some of the reasons as follows:

1. Weak private consumption and investment.

2. Low domestic demand conditions.
3. A slowdown in agriculture and allied activities.
4. The initial delay and deficiency in the south-west moon.
5. The high inflation on food and fuel has softened across major goods and services.

Due to these reasons, the RBI has cut down the forecast digits of the Gross Domestic Product
(GDP) growth rate to 6.1% from 6.9% in 2019-2020 and to 7.0% from 7.2% in 2020-2021.
The forecasts of the GDP growth rates can be seen in Table 1 and 2.

Table 1: Earlier Forecast Of The Real GDP Growth Rate During 2019-2020 And 2020-2021

Source:
Survey of Professional Forecasters on Macroeconomic Indicators – Results of the 59th
Round, RBI

Table 2: Present Forecast Of The Real GDP Growth Rate During 2019-2020 And 2020-
2021

Source: Monetary Policy Report – October 2019, RBI

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RESEARCH METHODOLOGY OF THE STUDY:

The study is both descriptive and analytical in nature. It is a blend of primary data and
secondary data.The primary data has been collected personally by approaching the online
share traders who are engaged in share market. The data are collected with a carefully
prepared questionnaire. The secondary data has been collected from the books, journals and
websites which deal with online share trading.

Source of data

Primary Sources: The primary data was collected through structured unbiased questionnaire
and personal interviews of investors. For this purpose questionnaire included were both open
ended & close ended & multiple-choice questions.

Secondary method: The secondary data collection method includes:

 Websites
 Journals
 Text books
Method Used For Analysis of Study

The methodology used for this purpose is Survey and Questionnaire Method. It is a time
consuming and expensive method and requires more administrative planning and supervision.
It is also subjective to interviewer bias or distortion.

Sample Size: 100 respondents

Sampling Unit: Businessmen, Government Servant, Retired Individuals

Statistical Tools: MS-excel and pie and bar diagrams are used to analyze the data.

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LIMITATION OF THE STUDY

 A project duration of 45 days