Automobile sales in India saw a steep decline in July this year. The automobile sector is currently facing prolonged demand slowdown for the past 12 months. This had cost at least 15, 000 job losses within 2-3 months, during the period when India is facing an unemployment crisis and overall economic slowdown.
In September 2019, the Finance Minister Nirmala Sitharaman had made a deep cut in the corporate tax rate from 30% to 22%. India’s combined effective tax rate was among the highest in the world. After the tax cut, the effective tax rate for all domestic companies has been reduced to 25.17%. India’s base corporate tax, due to this move, is now on par with most Asian countries – increasing its competitiveness in the global market. This move comes in response to the brewing problem of the economic slowdown in the country. The cut in the corporate tax rate was seen as a boon by the corporates in the midst of the growing crisis within the Indian economy.
After its brief stint as the world’s fastest-growing economy, India’s economic growth has been slowing to all-time lows. Crisil had forecasted India’s GDP growth to be 6.3% for the fiscal year 2020. Earlier it forecasted it to be 6.9%. This comes after the GDP growth rate was at its slowest in almost 6 years. Earlier, Moody too had forecasted economic slowdown by 6.2%. From these current data, it is obvious that the Indian economy is currently facing crisis due to a combination of factors such as increased unemployment rate, rural distress, liquidity crunch, etc.
India is largely an agrarian economy. More than 50% of its population is dependent on the agricultural sector for its livelihood and survival, though the returns are very low. The service sector, on the other hand, employs very few of the Indian labour force and its return nearly 60% of the Indian GDP. This is highly unfavourable for the Indian economy. To change this current trend, it is necessary to enhance the manufacturing sector. This can greatly boost India’s economic growth and solve the current unemployment crisis. The Make in India is a major step towards this direction.