The next two months will be crucial for the Indian economy, which is facing the worst growth slowdown in six years, as per official GDP data released on August 30.
State Bank of India (SBI) Chairman Rajnish Kumar told several business dailies that the next two months will be critical in terms of reviving the economy.
While growth for the April-June quarter slumped to a low of 5 per cent on weak consumer demand, Kumar hopes that demand will pick up once the festive season kicks in.
He, too, like many other economists feels that strong policy reforms are needed to tackle the slowdown, which seems to be a mix of structural and cyclical factors.
The next two months will be crucial for the government in terms of reviving the Indian economy. A mix of policy decisions and demand dynamics could decide whether India will be able to withstand the economic storm or face a prolonged slowdown.
Government is likely to closely monitor sales during the festive season, which is set to begin next month. Usually, consumer demand picks up during the festive months as sales activities increase significantly.
While the government would be hoping for a demand boost during the next two months, it won't be easy without reforms.
Economists feel that the government is working on measures that cater to the supply-side of operations while demand creation has been grossly ignored, which is a concern as supply growth without demand is no good.
BOOSTING MSMEs, EMPLOYMENT
The government has to come up with measures to increase wage growth, which declined significantly due to certain policy reforms aimed at correcting macroeconomic imbalances, showed an SBI study.
This, however, is not possible without injecting more liquidity into the system. Despite the bank mergers and shots of recapitalisation, Indian banks are far from recovery, with non-performing assets (NPA) close to Rs 8 lakh crore.
The NBFC or shadow banking sector, which is a key lender to Medium and Small Scale Enterprises (MSMEs), is still reluctant on lending to business as they continue to face the pangs of the liquidity crunch.