The statement made by the Finance Minister reflects the inefficiency, immaturity, and inexperience of the BJP in governance

“The gross overstatement made by the FM is a grave joke on the poor state of the economy.”
“The dip in GDP has become the ‘new normal’ for the BJP.”

  • Addressing Press in Chennai yesterday, the Finance Minister said, “The automobile and components industry has been affected by BS6 and the mindsets of millennials who now prefer to have Ola and Uber rather than committing to buying an automobile.”
  • She also said that a dip in GDP is ‘part of growth’. It implies that the dip in GDP has become the ‘new normal’ for the BJP.
  • The gross overstatement made by the FM is a grave joke on the poor state of the economy. She must self-expunge her remarks and apologies from the nation.
  • The Mobile app-based car booking system and the auto sector can not be correlated. App-based services like Ola and Uber prevail in metros and tier-II cities. Conversely, the sharp decline in the auto sector is spread across India including the rural regions as well.
  • Mobile app-based car booking system did not emerge at once. They have been in the country for almost a decade now. Indeed, app-based car booking is not a new trend that is responsible for killing the new car market. The trend of the slowdown in the automobile industry did not ncome all of a sudden. Sales have fallen in 12 of the 13 months since July 2018.
  • The Finance Minister should also remember the slowdown isn’t affecting auto companies alone, but its impact is felt across sectors, throughout the economy. Have Ola and Uber become this powerful that they can impact the economy at such a large scale?
  • Ridiculously, a Twitter hashtags ‘#BoycottMillenials’ and ‘#SayItLikeNirmalaTai’ are trending on Twitter, as citizens, especially Millennials are rebutting to the cruel joke made by the Finance Minister.

A. The Logic of the Finance Minister on Economic Slowdown at the Following Comical Reasons (unfortunately, they are tragic for the nation)

1. The ‘millennial mindset’ and ‘Ola and Uber’ are responsible for the dip in the automobile  industry sales

  • According to the data released by the Society of Indian Automobile Manufacturers (SIAM), automobile sales fell 31% to 200,790 vehicles in July 2019 from 290,931 in July 2018. It was the worst sales performance since a 35% decline in December 2000.
  • Sales declining in all automobile categories:
  1. According to the Centre for Monitoring Indian Economy, car sales fell by 23.3% during April-June 2019 in comparison to the same period in 2018. This is the biggest contraction in quarterly sales since 2004.
  2. Between April and June 2019, two-wheeler sales contracted by 11.7%. This is the biggest fall since October to December 2008, when two-wheeler sales had contracted by 14.8%, in the aftermath of the start of the financial crisis.
  3. A good indicator of rural demand, tractor sales during April to June 2019, fell by 14.1%, the highest fall in nearly four years.
  • The trend of the slowdown in the automobile industry did not come all of a sudden. The 31% fall in sales is also the ninth straight drop in monthly passenger vehicle sales. Sales have fallen inv12 of the 13 months since July 2018, underscoring the sharp slowdown in demand in the world’s fourth-largest automobile market.
  • All the companies are potential victims of the slowdown:
  1. In the month of July, Maruti’s sales plunged by 36.3%. Maruti sold 1.09 lakh units in July 2019, which is one of the lowest recorded numbers over the years.
  2. Similarly, Hyundai, Mahindra and Mahindra, and Ashok Leyland reported a 10%, 15%, and 14% decline in sales, respectively in July.
  • Around 280 car dealership in India has shut down in the past months, leading to a direct loss of 30000 jobs. There is a sudden fear of losing 1 lakh direct jobs in the sector in the coming months.
  • Ashok Leyland has recently announced about 59 non-working days across its five plants.
  • At the same time, vehicle loan growth has slowed down to 5.1%, the lowest it has been in five years.

2. Applying the FM’s logic, are landlords and Millennials going for rented accommodation responsible for the recession in the real estate sector?

  • The health of real estate is a massive indicator of the state of the Indian economy. It has links with about 250 ancillary industries.
  • According to real estate consultancy Liases Foras, 12.76 lakh houses are waiting to be sold in 30 big cities.
  • The inventory overhang is as high as 80 months in Kochi, 59 months in Jaipur, 55 months in Lucknow and 72 months in Chennai, implying it will take between five and seven years for developers in these cities to get rid of the present housing stock.
  • The top eight cities, including Mumbai Metropolitan Region, National Capital Region, Bengaluru, Hyderabad, Chennai, and Pune alone account for 9.66 lakh houses.
  • The real estate sector already grappling with a severe liquidity crunch as non-banking finance companies (NBFCs) have curtailed lending to developers following the collapse of IL&FS last year.
  • Generally, An inventory of 8-11 months is typically considered efficient and sustainable. Contrary, on a pan-India basis, it will take 42 months to clear this inventory.

3. Are Spendthrift overspending homemakers similarly responsible for the rising Fiscal Deficit, as per the FM’s logic? Is the money overspent by them leading to an imbalance in the economy’s balance sheet?

  • In a presentation to the 15th Finance Commission (FFC) on July 8, three days after the July 5 budget, the CAG re-calculated the fiscal deficit of 2017-18 to show that it actually works out to 5.85%. The government had reported a fiscal deficit of 3.46% that year.
  • According to the Finance Commission, “Fiscal Transparency-Lack of underlying conceptual framework under-reporting of Deficit, revenue deficit, Quality of Capital Expenditure Asset accounting, etc” were discussed in CAG’s meeting with the Finance Commission. According to the Finance Commission, “the CAG highlighted the fiscal risks due to non-transparency.”.
  • Pertinently, the Centre could meet the Revised Estimate (RE) for its fiscal deficit for 2018-19 only after a savage reduction in expenditure by Rs 1.46 lakh crore, or 5.9% from the Revised Estimates level, as tax receipts fell terribly short of the respective Revised Estimates.
  • The Central government plans to bring down the deficit to 3% repeatedly, the latest deadline to reach the target is 2020-21. It is nearly impossible to reduce the fiscal deficit from 6.1% to 3% in just less than two years.
  • Contrary to the Central government, the States have proved to be the better performers. The states performed relatively better on the fiscal front last fiscal — their combined deficit for the year is seen to be around 2.6%.
  • A major reason for the drastic increase in the fiscal deficit is the off-budget spending by the government. It reflects the unplanned nature and inefficient governance by the BJP.
  • Off-budget spending by the Centre in 2018-19 includes Rs 1.06 lakh crore recapitalisation of public sector banks via bonds, Rs 97,000 crore borrowings by PFC for lending largely to the government-sector power projects, Rs 61,000 crore by NHAI for highways and Rs 52,297 crore by IRFC for railway projects.

4. By the further expansion of the same logic of the same FM, are family businesses responsible for the shrinking labour force?

  • Data from the latest labour force survey reveal that the total workforce reduced by 9.1 million people between 2011-12 and 2017-18. The number fell from 474 million to 465 million.
  • Employment in agriculture fell by 26.7 million. Most of the unemployed individuals are women.
  • Employment in manufacturing also fell in this period, by 3.5 million.
  • These have to have a negative impact on aggregate demand, which would then have a more prolonged and severe impact through the negative multiplier effects of employment losses. These clearly require countervailing measures by the government.

5. By the same logic of the FM, is the growth and development of the United States responsible for the continuous weakening of Rupee?

  • The rupee has emerged as the worst-performing Asian currency in the month of August.
  • Rupee by 222 paise or 3.2% against the US dollar this month, so far.
  • Going on a six-month low, Rupee closed at 71.70 against the US dollar currently.
  • The projections hint a near term weakness in rupee with a higher probability of it hitting 72 and 72.70 within a month.

6. Similarly, Madam FM, are Credit Rating Agencies responsible for downgrading credit ratings?

  • According to Prime Database, in the past six months, downgrades by the rating agencies outpaced upgrades. Downgrades were at 167 against 73 upgrades. The ratio of Downgrades:Upgrades can be roughly estimated to 2:1.
  • Rating company executives said that the increased number of aggregate downgrades during the first half of the year was a reflection of the downturn in the macroeconomic scenario.
  • The downgrades are to do more with prime debt and is an indicator that the quality of debt has deteriorated.

7. Are the advocates of Swadeshi, similarly, responsible for the decline in Export figures?

  • As compared to June 2018, Indian exports fell down by 9.71% in June 2019.
  • Shipments for 21 out of 30 sectors registered decline with the steepest fall registered in gems
    and jewelry, engineering goods and petroleum products.
  • Textiles exports have sharply declined. Cotton yarn exports slumped 44% in July 2019 as compared July 2018. According to the Cotton Textiles Export Promotion Council, between April and July, cotton yarn exports fell nearly 35%.

8. Equally, Madam FM, are local moneylenders and Sahukars responsible for Falling Foreign Direct Investments?

  • Foreign direct investment (FDI) into India contracted by 7 percent to USD 33.49 billion during April-December in the 2018-19, according to commerce and industry ministry data.
  • Following the trend, in the 2018-19 full fiscal year, FDI plunged by 1% to $44.37 billion as overseas fund inflows subsided in telecom, pharma, and other sectors, official data showed.
  • While foreign investments slumped 56% to $2.7 billion in telecommunications, they fell 74% to $266 million in Pharmaceuticals and 32% to $1.1 billion in the power sector. Interestingly, this drop came even after the government has allowed foreign investors to own up to 100% stake in telecom and pharma companies.

9. Are the researchers of the Finance Ministry drafting the Annual Budget and Economic Survey responsible for the falling GDP figures, by the ever-changing methodology applied by them?

  • India has slipped one notch in the World Bank’s Gross Domestic Product (GDP) rankings in 2018, and is now the seventh-largest economy with the United Kingdom and France ahead of India, data from the international lending institution said.
  • The data comes at a time when India has set the target of becoming a $5 trillion economy in GDP terms by 2024, and a $3 trillion economy in the current financial year.
  • Additionally, the GDP estimates for the January-March quarter of the financial year 2018-19 were recorded at 5.8 percent, government data showed. This happens to be the lowest growth rate in the past five financial years.
  • This also means India is no longer the fastest-growing major economy in the world. China is ahead at 6.4 percent GDP in the March quarter. India’s GDP estimate for the entire financial year 2018-19 was 6.8 percent.

10. Lastly, as per the Finance Minister of India’s logic and reasoning, is an earthquake responsible for ‘Crashing’ of the stock market?

  • Indian stocks just suffered their worst July in 17 years as the disappointment with the Budget, muted corporate earnings, ongoing credit crunch, and consumption remained a drag on sentiment.
  • The Indian equities declined, headed for their steepest fall for the month of July in 17 years.
  • The BSE Sensex dipped around 5 percent, while BSE Midcap and Smallcap indices declined 8 percent and 11 percent, respectively. Nifty 50 has lost about 9.6%.
  • 1 month after Budget, investors lose Rs 13 lakh crore. The average market capitalisation of the BSE-listed companies fell from Rs 151.35 lakh crore on the Budget Day, July 5, to Rs 138.37 lakh crore on August 5, wiping out Rs 12.98 lakh crore.
  • A large part of the selling can be attributed to foreign institutional investors (FIIs), which have pulled out more than Rs 13,000 crore from Indian equity markets, while they were net buyers in the debt segment for over Rs 8,000 crore, Securities and Exchange Board of India (SEBI) data shows.
  • More than 50 percent of the BSE500 stocks fell in double digits. As many as 283 stocks, or 56
    percent of the names, have fallen 10-60 percent since the Budget day.

B. BJP Government is Inefficient in Tackling Fraudulent Loan Cases

  • According to the received on an RTI request, a total of 2,480 cases of fraud involving a huge sum of Rs 31,898.63 crore rattled 18 public sector banks in the first quarter of this fiscal.
  • SBI was the biggest prey to frauds with a 38% share. 1,197 cases of cheating involving Rs12,012.77 crore were detected in SBI in the first quarter.
  • Earlier in August, the Annual Report of the RBI revealed that the value of bank fraud cases increased 74%, from ₹41,167 cr in FY18 to ₹71,543 cr in FY19.
  • The number of bank fraud cases rise from 5,900 in FY18 to 6,800 in FY19.
  • The average lag between the date of occurrence and its detection by banks was 22 months.
  • The average lag for large frauds, i.e. ₹100 crore and above, amounting to ₹52,200 crore reported during 2018-19, was 55 months.

C. Questions of the Congress Party?

  • Why the Finance Minister is more interested in cracking jokes and finding excuses instead of putting-in efforts to bring the economy on track?
  • How will India be able to become a USD 5 Trillion economy with such a slowdown?
  • The slowdown in automobile sector is since past one year. Then why steps were not taken in the recent General Budget to overcome the problem?
  • Why is the Prime Minister not coming at the front, taking responsibility, and taking steps to tackle the slowdown? Why is he silent and hiding?

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