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Economic slowdown can be attributed to structural, cyclical factors: SBI Report
Aug-16-2019

SBI in its latest research report 'Ecowrap’ has said that the present economic slowdown can be attributed to a combination of both structural and cyclical factors, apart from the global uncertainties. It noted that that there are clearly a host of structural factors that are holding back current consumption. It added that the country's economy is showing signs of slowdown, with hi-frequency indicators like industrial output posting subdued growth and automobile sales touching historical lows.

According to the report, a substantial decline in wage growth (both rural and urban wages) in recent times resulting in lower household savings (a result of conscious policy decisions to correct macro imbalances) has possibly slowed down the growth in real per capita income that is holding back demand. It also pointed out that the share of private sector has fell to 30 percent during 2015-19 from 50 percent during 2007-14 period in new project investments. It felt that a possible increase in current capacity utilisation (at 76.1 percent) can happen only if the sector-specific issues are simultaneously addressed to boost demand of bank credit.

About automobile sector slowdown, the report stated it is not restricted just to India, but the impact is felt across geographies with China also facing the impact of the auto slowdown. It also said the criticality of automobile sector can be gauged by a humongous 30 million employment on a per annum basis which it generates. Out of this more than 50 percent could be of contractual nature, hence the seriousness of the current auto slowdown.

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