Just a few days after India lost its position as the fifth-largest economy in the world and dropped two spots, several top company executives have come out with an open warning about the economic slowdown.
On Friday, Larsen & Toubro chairman AM Naik cited concerns about tightening economic condition, and said the “situation is challenging”. He went on to indicate that economic growth for the year would not be more than 6.5 per cent at any point in time.
“My feeling is that though they (government) claim it is 7 per cent plus, if we can maintain 6.5 per cent, we will be lucky,” he said.
Following up on Naik’s comment, HDFC Chairman Deepak Parekh said on Friday said there has been a “distinct slowdown” and highlighted the tight liquidity scenario pertaining to non-banking financial companies (NBFCs) and housing finance companies (HFCs).
Parekh said there is a critical need to re-instill confidence in lenders to support economic growth. He said banks are reluctant to lend and are only going for “high-rated” NBFCs and HFCs. Meanwhile, credit outflow to several other smaller entities has been choked.
The selective lending has, therefore, affected several core sectors that have witnessed a slowdown over the past few months. Oil, real estate, auto, and manufacturing are some of the sectors that have seen a gradual fall in productivity.
Indian markers have also been volatile for the past few weeks, triggered by a high outflow of foreign and domestic investments. While external factors such as US-China trade tussle and negative US Fed Rate commentary have affected sentiments, weakness in demand and growth have also dampened investor sentiments.
“Evidently, there has been a distinct slowdown in the economy which was reflected in a lower GDP growth of 6.8 per cent in FY 2019,” Parekh explained.
He, however, said that the slowdown in growth is temporary in nature. However, he said that the government needs to relax certain norms to boost consumer demand.