Economic Slowdown - Are we missing something?

It has been over a year since the economy is facing a downturn which has followed many backfires, loss of job on the one hand, and many reforms to revive and correct the economy on the other. Apart from the reasons other than the long term impact of demonetization which happened almost 3 years back, followed by the implication of GST and the global recession, we need to look at another reason which is left unnoticed in this hazel.

Economy is simply the demand and the supply which is affected by the behavior and interactions between the seller of a resource and the buyer for that resource. Any kind of slowdown is bound to affect the economy in an enormous ways. Indian Government and Regulators since these past 5 years especially has been trying to eliminate the middlemen to ensure the end customer receives the direct benefit of the products/services provided to eliminate the corruption/inflation that happens in this process.

This is an excellent step, but it has backfired at certain instances creating joblessness, when the middle-service provider is eliminated and has impacted the genuine small retail businessmen, service providers and various MSMEs. The profit margin in this process, as a result, has been shrinking thinner adding on a financial and mental burden on the people. We need to consider the manpower, where India being second most populated country in the world, imagine the number of middlemen service provider who might have been and are still being affected by these implications only to reach the direct customer.

The focus shall rather be on improving the service which is being provided and its quality rather than eliminating people in the chain. This helps the economy to grow in a balanced approach which is sustainable and long term where the economy has its benefits across different sectors rather than one particular group of people, industry or area. When the middlemen are eliminated, their entire family suffers who are dependent on that person’s income. Subsequently, this impacts the consumption as the purchasing power is restrained following thinner profit margin. As confidence recedes, so does demand.

For examples, implication of and allowing Direct Investment in Mutual Funds discards the middlemen like the involvement of agents, broker or distributor. Ecommerce/Supermarkets like Amazon, Flipkart, Reliance Fresh, Big Bazaar or DMart who have discarded various middle-service providers to let the direct consumer enjoy the complete benefit. These middlemen are the one who first face the wave of financial burden and joblessness which gives a start to an entire cycle. The situation is identical to almost any other product or service where the manufacturer supplies directly to the customer.

Before we move on with the current state, we need to take a moment and review the situation from this perspective discussed above. In the reach to benefit the end user directly, a hole has been punched in the cycle which is having a domino effect thereon leaving behind a long-term trail affecting the people of the economy in this vicious circle.