Economic Notes, June 2019

Annual Growth_EngThe Indian economy is in the midst of a prolonged slowdown. This is what all the business papers have been saying for some time. This has hit the profits of the capitalist class as a whole. The representatives of the capitalist class are demanding that the Narender Modi government, which has come to power with an even bigger majority following the General elections, take immediate measures to address their concerns.

Internal consumption of goods within the country, and export of goods and services, public investment in infrastructure and investment by private capitalists in new projects, all contribute to overall economic growth. A slowdown of economy has serious consequences for the working class as it leads to increased unemployment.

India’s core economy grew at 4.3 per cent in 2018-19, its second slowest pace in the past 5 years, down from 4.9 per cent in 2014-15. This comes from latest data on eight core industries – Coal, Crude Oil, Natural Gas, Refinery, Fertilisers, Steel, Cement & Electricity. (Business Today, May 8, 2019)

Of these 8 core industries, Crude Oil, Fertilisers and Natural Gas reported negative or low growth in 2018-19. While Crude oil showed a negative growth of 4.1 per cent (worst in the past 5 years), natural gas grew just 0.8 per cent and fertilisers even lower at 0.3 per cent.

Industrial activity is slowing. The index of industrial production (IIP) growth of 3.69 per cent in the quarter ended December, 2018 is the lowest in the past 5 quarters. January IIP fell further to just 1.79 per cent. February IIP was even lower at just 0.1 per cent – the lowest in 20 months.

Electricity generation is another indicator of industrial activity. In 2018-19, power generation grew 3.56 per cent, the lowest in the past 5 years. Growth in finished steel production is the second lowest in 5 years.

There has been a fall in sales of cars, two-wheeler, and tractors.

Auto and two-wheeler sales have fallen month after month since Jan 2019. The passenger vehicle sales fell by 9 per cent between Jan and May 2019; the fall in April and May 2019 was as much as 17 and 20 per cent respectively. The sale of two-wheelers between Jan to May 2019 fell by more than 11 per cent; in Apr and May the sales fell by 17 and 16 per cent respectively.

More than 5 lakh passenger vehicles worth Rs 35,000 crore are lying unsold at the beginning of June 2019. The number of unsold two-wheelers is as much as 30 lakh of value of nearly Rs 17,000 crore. Seven largest passenger vehicle and two-wheeler manufacturers of the country have shut down their plants from 4 to 12 days due to fall in sales. All contract and temporary workers, who constitute half to two-third of total workforce at these plants, lost their wages for the shutdown period.


Sale of tractors has also seen a fall which is a reflection of the serious distress in the rural economy of the country.

India’s exports have stagnated or fallen in recent years. India’s exports which had peaked to $314.88 billion in 2013-14, had declined to as low as $262.2 billion in 2015-16 before recovering partially to $303.3 billion in 2017-18, still way short of the 2013-14 numbers. The exports of leather and leather manufacturers peaked at $6.2 billion in 2014-2015. In 2018-2019, they were at $5.3 billion. The exports of ready-made garments reached a peak of $17.4 billion in 2016-2017. In 2018-2019, they were at $16.1 billion. For agriculture and allied products, the exports peaked at $43 billion in FY14. In FY19, they stood at $38.5 billion. Thousands of people have lost jobs due to slowdown in exports.


Private capitalists are refusing to invest as there is too much idle capacity, the markets are full of goods, and people do not have money to buy. It has been estimated that in many sectors, there is an excess capacity of about 30%.

New investment proposals for 2018-19 amounted to Rs 9.5 lakh crore, the lowest in 14 years since 2004-05. It is much lower than the average of Rs 25 lakh crore per year in the period 2006-2007 to 2010-11.

The slowdown of the economy is a reflection of the fundamental contradiction between socialised production and the private ownership of the means of production. In the drive for maximum profits, the capitalists have intensified the exploitation of workers and robbery of the peasantry to such an extent that the workers and peasants and other working people cannot buy the goods that are produced in the market. The slowdown of the world economy has affected the possibility of getting a bigger share of the world market through exports. Capitalists have cut back in production, many capitalists have declared bankruptcy, while others are growing bigger in the conditions of the crisis through mergers and acquisitions. In the conditions of prolonged slowdown, the government has been investing in infrastructure projects like highway construction to boost the economy and provide a market for the big capitalist monopolies. The capitalist class is demanding that the Central government accelerate on this course.

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