Attention needs to be paid to both cyclical and structural dimensions of India’s present economic slowdown
India’s current economic slowdown is due to a combination of two underlying trends. First, there is the short-run cyclical slowdown exhibited by a number of high-frequency indicators, reflecting a significant fall in demand, especially for sectors such as automobiles, consumer durables and housing.
Second, there is the more serious long-term fall in investment and savings rates. Raising growth requires that attention be paid to both cyclical and structural dimensions of the problem.
Fixed capital formation
When it comes to the Gross Fixed Capital Formation (GFCF) relative to GDP at current prices, a steady fall has been visible since 2011-12, when it was 34.3%. By 2017-18, it had fallen by 5.7% points, to a level of 28.6%.
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