Nomura Financial Advisory & Securities on Friday said cyclically the economy is clearly slowing down due to domestic and global factors and this slowdown will continue for at least a couple of more quarters.
In an interview to CNBC-TV18, Sonal Varma, managing director and chief India economist, said, "I think over the last five years two things have happened. When you are looking at the growth, we need to look at the trend and the cycles. Over the last 6-7 years, clearly India has not seen any investment cycle recovery, so that clearly indicates that growth actually has been going down. Within that broad trend of moderating potential, we have seen two cycles, 2014-2015 and 2017-2018 upcycle."
Varma said, "The bigger challenge, of course, is the more medium-term trend itself and what we need to do to reverse that trend as the global factors, of course, are not looking very supportive."
Talking about unemployment, she said, "It is a challenge worldwide in terms of being able to create a sufficient number of jobs. In India’s case, we have skipped the manufacturing stage of development and going back to the world that we will get into the next 10-20 years the kind of jobs that will be created."
Further, Varma said, "If we sort of dial back last five years, the problems we had back then were very different. We had high inflation, legacy and NPA issues. In the last five years, we have sort of spent correcting the macro stability and trying to recognise and resolve the NPA issues. So, the last five years have been more about creating the foundations."
"After building the foundation, the next five years we need to get to the next leg of growth, which is where the focus has to be. Coming back to the question on the fiscal side, most fiscal consolidation in India has historically always been via revenue rather than expenditure compression and therefore, GST has not led to the kind of revenues one has expected. But hopefully, post elections, if we do see better tax compliance and revenues, then it has been revenue driven fiscal consolidation and it cannot be purely expenditure driven fiscal consolidation in India," she added.