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1.

What were the key reasons of slowdown in aggregate demand in India during the 4th
quarter of the year 2012-13?
The main key reasons of slowdown in aggregate demand is,

Private final consumption expenditure, which is the principal component of GDP


at market prices, continued to decelerate during the quarter on the back of weak
agricultural production and persistent high consumer price inflation.

The growth rate of government final consumption expenditure also moderated


during Q4.
Infrastructure project delay has been a major factor in Indias low growth. Project
implementations are getting delayed due to delays in land acquisition,
forest/environment clearances, insurgency problems in mining belts, geological
surprises, contractual issues, etc. because of which the demand has decreased.
2. How did it impact the business?

Some of the institutionally assisted projects which received sanction in 2010-11


and 2011-12 have been cancelled, due to which investment expenditure on these
projects got reduced.
With the cancellation of 2G licenses in February 2012, the telecommunications
sector has been struggling, with a noticeable decline in investor interest.

Sales growth for listed Non-Government Non-Financial (NGNF) companies


decelerated further in Q4 of 2012-13 to 4.1 per cent.

Non-plan expenditure, on the other hand, was higher due to a sharp increase in
expenditure on the revenue account. Subsidies on food, fertilizers and petroleum
accounted for 2.5 per cent of GDP as against the 1.8 per cent that had been
budgeted for the year.

All the above statements show that somewhere in the economy supply of money had
reduced, in the result of which the aggregate demand has decreased. Government
unplanned expenditure can also be a reason for decreasing in their treasuries, which
results in lower government expenditures.

3. How will increase in government expenditure on infrastructure boost the aggregate


demand and hence the GDP?
If government increase their expenditures on infrastructure, then
Investment will increase, results in increase money circulation in the economy.
The income power of the public will increase; result in increase demand for goods
and services.
Increase demand for goods and services would help in growing the GDP.