This year’s Indian election gave a solid majority to PM Modi and a positive forum to drive through market reform liberalization. But “Modi mania” alone will not halt the underperformance of the economy in 2020. Nonetheless, with economic growth slipping to its lowest rate in 6 years, the cards are facing a lengthy recession that is inclined to take the spotlight off the popularity of the PM.
This is since next year, India’s financial crisis, its effect on business, and falling prices will start to bite. Lending growth has recently reduced to its lowest possible level in almost 2 years. This is a pattern that is likely to persist until 2020, provided that problem that popular lenders encounter with non-performing loans and the cumulative impact of the evolving interconnected liquidity crisis throughout India’s financial system. In the meantime, with low prices already harming agricultural wages, India’s largest employer, consumer spending will be further be depressed by a downturn in lending and a drop in savings.
During the year ahead, the broader demand downturn and the financial sector will also tend to hinder private investment. Mirroring this, the country’s business faith has already shrunk in 6 years to its lowest. As well as the many domestic factors that contribute to the weakened prospects of companies are likely to continue through 2020 India’s automotive sector, which employs an estimated 35 million workers.
Modi may rely on his mass appeal in the face of a jittery economy, but faith in his government to push for reforms has plummeted. “Political confidence” has recently fallen to its lowest level in 3 years in a business poll conducted by the National Council of Applied Economic Research, a think-tank. The BJP was often criticized for being too occupied by cultural and religious problems when it comes to the economy. That being said, the general populace will be aware of the record and aspiration of the PM, successfully or otherwise, to push through key policy changes. But it may get impatient soon.