DESPARDES — ‘India Situation’ now appears to be adding another chapter — the story of an economy in distress, a banking system in pain and consumers too worried about job cuts and rising costs to spend.
An unfinished residential housing complex in New Delhi dubbed Wish Town — a sprawling 1,063-acre property development billed in the media as “global homes with an Indian address” is one of the casualties of the situation.
Last week the International Monetary Fund (IMF) slashed India’s growth forecast — it needs 9%-10% pace in the economy to combat extreme poverty in a nation of 1.3 billion people. And in November, Moody’s downgraded India’s economic outlook from ‘stable’ to ‘negative’ and forecast that the slowdown will be long-lasting.
The New York Times dubbed it “Mistrust Economy”.
Bhavesh Desai, an American business and financial professional of Indian-origin tells DesPardes the situation is “Modinomics at work”.
To make matters worse for Modi, according to Bloomberg, he’s dealing with the biggest social upheaval since he came to power. Thousands of students and people from neighborhood groups have joined forces countrywide to protest a controversial citizenship law that critics say discriminates against Muslims and undermines India’s secular roots. The fallout has dented Modi’s image abroad and given some investors reason to rethink the ‘India Rising’ narrative.
“The real estate market illustrates the extent of the economy’s woes,” says the latest report in Bloomberg.
Property developers like Wish Town’s Jaypee Infratech Ltd., the mag says, have gone bust, are mired in billions of dollars of debt and unable to secure funding to complete projects as promised. Non-bank financing, a $335 billion industry that became the lifeline for millions of small businesses and consumers in recent years, has dried up. Prospective home buyers are paying mortgages for apartments they can’t live in, putting their budgets under strain. And millions of construction jobs are at risk, with effects that are already rippling across India’s all-important rural economy.
Last year’s Nobel prize winner Abhijit Banerjee warns of a “major recession” in the country.
With India’s economy seen growing at slowest pace since 2009 and BJP-ruled government’s Modi’s gambit to add Hindutva sheen to India’s secular democracy, Modi who secured a bigger mandate in last year’s election, is now confronted with restive communities, rising unemployment as layoffs spread across industries from automakers to jewelers.
“Lack of confidence, whether among buyers, developers and in general among corporates, is one of the key reasons for the intensifying slowdown. The shadow banking crisis was the final nail in the coffin,” says Parth Mehta, managing director at Paradigm Realty, a Mumbai-based mid-size builder, which is scaling back.
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