On Independence Day, Narendra Modi reviews the state of the economy with Finance Minister Nirmala Sitharaman

Prime Minister Narendra Modi on Thursday comprehensively reviewed the state of the economy with Finance Minister Nirmala Sitharaman as his government scrambled for solutions to tackle a fast-spreading slowdown in various sectors, which is eroding wealth and causing job losses.

Modi, after delivering his sixth straight address to the nation on Independence Day from the ramparts of the Red Fort, went into a brainstorming session with Sitharaman and all top officials in her ministry, sources privy to the development said.

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The meeting, they said, was to assess the nature of the slowdown and its long-term impact.

There are expectations that the government would come out with sector-specific stimulus sometime soon.

An email query sent to the spokesperson of the finance ministry remained unanswered.

India's economic growth has slowed to 6.8 percent in 2018-19 - the slowest pace since 2014-15, consumer confidence is waning and foreign direct investment has plateaued. International trade and currency war is further aggravating the problem.

While the finance ministry has remained tight-lipped on measures being contemplated to take the economy out, Reserve Bank Governor had earlier this month stated that the slowdown is more cyclical than structural and the growth is expected to review by the fourth quarter.

But there are ominous signs showing that slowdown may be deep. The auto sector is facing its worst crisis in two decades and reports suggest thousands of job losses in the automobile and ancillary industry.

In the real estate sector, the number of unsold homes has increased while fast-moving consumer goods (FMCG) companies have reported a decline in volume growth in the first quarter.

Though lending by banks to industries has shown a significant jump from 0.9 percent in April-June quarter in 2018 to 6.6 percent for the same period this year, the same to job-creating MSME sector has slipped from 0.7 percent in 2018 to 0.6 percent in June quarter.

Also, direct tax collections have grown by just 1.4 percent. The growth in GST collection till July this fiscal too has been only nine percent as against 18 percent estimated in the Union Budget.

With sales of cars, tractors and two-wheelers declining to 19-year low, reports suggest 300 dealerships have been shut down and around 2.30 lakh jobs have been axed in the sector. The Society of Indian Automobile Manufacturers (SIAM) says about 10 lakh jobs have been hit in the auto component manufacturing industry.

In the real estate sector, unsold inventories stand at 42 months.

In the FMCG sector, Hindustan Lever reported volume growth of 5.5 percent in the April-June quarter compared to 12 percent last year. Dabur posted a growth of six percent against 21 percent last year.

Britannia Industries recorded a volume growth of six percent against 12 percent in the same period last year. Asian Paints saw a volume growth slump from 12 percent in the April-June quarter last year to nine percent this year.

Finance Minister Nirmala Sitharaman had held a series of meetings with bankers, industry, capital market players and real estate earlier this month to firm up steps to increase investments and boost economy 

Foreign investors during their meeting with Sitharaman had suggested that higher surcharge on income beyond Rs 2 crore, which was imposed in the Budget, should not be applicable on FPIs. The government's decision on surcharge had impacted the market.

On its part, the Reserve Bank of India, with inflation under its comfortable zone, reduced the key lending rate for the fourth successive time early this month to push economic activities. It has also asked banks to pass on the benefits of the rate cut to borrowers.

(Edited by Evelyn Ratnakumar)

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