There are three types of economies globally, in which developing emerging and developed economies are counted. Emerging economies are counted as strong economies. The growth engines of Asia are China and India. Both Asian countries are currently in the grip of economic recession.
If there is negative impact of trade war with America in China, then cyclical and structural slowdown is being talked about in India. This was further confirmed when the GDP growth rate fell to 5% in the first quarter of the financial year 2019-20, this level of growth is the lowest in the last 6 years.
The declining GDP rate is a clear indication that the condition of the three sessions is not normal. This is affecting people’s income demand and investment. People are losing their jobs due to stalled production in companies. The demand in the market is not derivative due to lack of cash. The level of investment is also low as other savings fall.
According to the latest annual report of the Reserve Bank of India, the recent decline is temporary rather than deep structural lethargy which can turn into a cyclical decline. There are structural problems that need to be overcome in activities related to areas such as land labor and agricultural produce marketing. While manufacturing business, hotel transport, communication and broadcasting construction, agriculture and real estate, there is a cyclical decline.
The decrease in market demand is an example of a cyclical slowdown. Whereas structural slowdown means that the regions which have previously achieved better economic growth are facing sector-wise problems. These will require policy intervention such as solving the problem of access to credit or adapting to various policies.