October 4, 2017

Is India facing possible stagflation?

Stagflation: high inflation + high unemployment + weak demand

The first quarter of 2017-2018 saw the growth of gross domestic product (GDP, the total value of all goods and services produced in a country in a year) drop to 5.7% from 7.9% in the corresponding period last year—the lowest rate in the three years the Bharatiya Janata Party (BJP)-led government has been in power. The index of industrial production (IIP) for July released on Sept. 12 came in at 1.2%, after contracting 0.2% in June, showing that manufacturing has not picked up. On the same day, the consumer price index (CPI) showed that the inflation rate had risen to a five-month high of 3.4%.

Are these numbers an early warning of possible stagflation with low demand, high unemployment, decline in GDP, and persistently high prices? What will it take for the economy to be nursed back to health?

Himanshu, an associate professor in economics at Delhi’s Jawaharlal Nehru University, believes the breakdown is neither a result of one-off events such as demonetisation, nor a technical problem. In an interview to Scroll.in, he listed the reasons for the collapse of domestic demand and the economic crisis India is facing. He also explained why the government has limited room to manoeuvre and bring the economy back on track.

Read more at https://qz.com/1081126/an-economist-says-india-lacks-the-guts-to-admit-that-it-faces-epic-economic-problems/

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