There is an even chance that the Indian economy will grow at an annualised average rate of 6.5% over the next five years, credit rating and research firm Crisil said in a report on Sunday, signalling that the country’s slowdown is stickier than earlier believed.
The slower expansion will affect job creation and job prospects, while on the other hand, weak income will affect the sales of a range of goods — from cars to two-wheelers, from houses to cement and steel.
Crisil warned that unless pressing policy and implementation issues are addressed, even sustaining this (6.5%) growth would be difficult.
The Indian economy’s average annual expansion of 6.7% during the past five years (2009-14 and Crisil’s forecasts suggest the economy’s a steep turnaround wasn’t likely anytime soon.
"With 6.5% average GDP growth, non-farm employment over this period will at best grow by 37 million," Crisil said in a report titled "Of Growth and Missed Opportunities".
"This means an additional 14 million (people) will be forced to either depend on low-productivity agriculture or remain unemployed," it said.
By 2019, more than 51 million people would be seeking employment.
"Given insufficient job opportunities, labour force will not be able to migrate to the higher-wage, more- productive industry and services sectors," the report pointed out.
Elevated prices have hurt family budgets, as companies are offering meagre salary hikes and are holding back expansion and hiring. Besides, high inflation has prompted the RBI to raise lending rates.
Households putting off spending are early warning signals for the onset of an economy-wide squeeze.
According to the Crisil report, sales of consumer items such as cars and televisions "have taken a huge beating in the last 2-3 years" .
"The high growth phase won’t return soon-not in the next five years at least," the report said.
India’s economy has now recorded five successive quarter of sub-5% growth, and appears set to clock the second consecutive year of annual growth of below 5%, the first time in 25 years.
India’s economy grew by 4.5% in 2012-13, the worst in a decade.
From a foreign investors’ darling to an economy characterised by policy flip-flops, the Indian economy’s turnabout has been as rapid as the heady 9%-plus growth it clocked during 2004-2008.