India has suffered six consecutive quarters of slowing economic growth and disappearing jobs, causing layoffs, reduced household incomes, and, as we have noted in our Geopolitical section, rising public unrest.
The economy grew by 4.8 percent in 2019, far below the 6.8-percent pace of 2018. Inflation accelerated and businesses all but stopped investing. And, among economists, there are questions if in fact the government is inflating those numbers and the economy grew much slower.
Last September, India cut corporate taxes by $20 billion to spark business investment and revive weak consumer spending.
But only 3 percent of Indians pay income taxes. They are affluent enough that they could decide to save money from tax cuts and not spend it because the economic outlook is so dark.
To spur domestic manufacturing, Prime Minister Narendra Modi’s government also has raised import duties on a range of goods and may add duties to as many as 50 other categories of goods.
The government’s new budget, unveiled last week, included personal income tax cuts and plans to build roads and airports. But there were no broad initiatives to create jobs on a large scale or to shore up the country’s financial institutions after a series of high-profile bank failures.
“When the private sector economy is in such bad shape, it makes a great deal of sense for any government to spend,” said Ritika Mankar, chief economist at Ambit Capital. However, among economists’, they rate they range the new budget from “modest” to “smoke and mirrors.”
TREND FORECAST: As we have noted in the Geopolitical section on India in this Trends Journal, Prime Minister Modi’s pursuit of a divisive nationalist policy favoring Hindus over Muslims, at a time when the economy is rapidly softening, has contributed to the economic woes.  
Thus, we maintain our forecast that as the global economy slows, economic conditions will continue to worsen in India. The lower the economy goes, the larger the street protests will grow. And, the larger they grow, the stronger the government will react with violence to clamp down on them.

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