“It is believed by many that the economic slowdown is more psychological than economical.” Give arguments For and Against this view.
The economic slowdown has affected the banking business all over the world. Gradually, other sectors like housing, real estate, civil aviation, automobiles, industries and services also got affected and engulfed the entire world economy. Indian economy has been no exception and got influenced by the happenings. As a result, the effects of the slowdown have been experienced all over the country, across all the sectors. Many people, including some of the economists, feel that in a diverse economy like ours, economic slowdown is more of psychological in nature, as there appears to be no plausible explanation for it.
Arguments For the View
(a) India is a diverse economy and has a strong base in agriculture and services sectors. The economic slowdown being experienced in the country is more of a psychological than a tangible reality.
(b) USA is the largest economy in the world and most of the economies of the world are dependent on its performance, directly or indirectly. This nature of the American economy, coupled with its performance, creates a lot of psychological impact on the investors, both domestic as well as foreign.
(c) In an economy which is led by booming services sector, economic slowdown is more in the mind. Even after slowdown in the BPO sector, other services like insurance, finance, hospitality, telecommunication etc.
Arguments Against the View
(a) The growth rate of the Indian economy is likely to come down from over 9 per cent to 7 per cent in 2008-09. There is no denying the fact that the economy has actually slowed down.
(b) Indian government has taken several steps in addition to a few bail out measures in the last few months because the slowdown was being experienced and was likely to get worse.
(c) Economic performance of an economy is measured on the basis of some economic criteria. It is not a psychological problem. Its causes and effects are all economic in nature and there is no scope for any psychological manipulations.