Growth sinks to 6-yr low at 4.5%
Fiscal deficit 102% of Budget estimate; core sector output falls 5.8% in Oct
Indian economy continued with its downward slide as GDP growth slowed down to 4.5 per cent in July-September quarter from 7 per cent in the corresponding period in the last fiscal. This is the lowest GDP growth for the quarter since January-March of 2012-13, when the growth was at 4.3 per cent. The slump in the GDP growth is mainly due to deceleration in manufacturing output and subdued farm sector activity, according to official data released on Friday.
Also, the output of eight core infrastructure industries contracted by 5.8 per cent in October and country’s fiscal deficit hit 102.4 per cent of 2019-20 Budget Estimate at Rs 7.2 lakh crore at the end of October.
The sixth consecutive quarter slowdown of the GDP showed that the consumer demand has not improved despite several Government measures and Reserve Bank of India’s intervention by way of cutting the interest rate. There is every possibility that the RBI may further cut the interest rate by 25 basis points in monetary policy review meeting on December 5.
The falling GDP has cast doubt on India crossing even 5.5 per cent growth during the current fiscal, and possibility of realising the goal of $5 trillion economy by 2024. On a half-yearly basis (April-September 2019), GDP growth came down to 4.8 per cent as compared to 7.5 per cent in the same period a year ago. The RBI had lowered the GDP growth projection for 2019-20 to 6.1 per cent from earlier 6.9 per cent.
The slew of bad news poses a serious challenge to the Modi Government which has come under severe criticism from the Opposition which alleged “mishandling” of the economy, thus affecting job creation, and breaking the backbone of small and medium class traders through demonetisation.
According to the data released by National Statistical Office (NSO), the gross value added (GVA) growth in the manufacturing sector contracted by 1 per cent in the second quarter from 6.9 per cent expansion a year ago.
Similarly, farm sector GVA growth remained subdued at 2.1 per cent, down from 4.9 per cent in the corresponding period of the previous fiscal. Construction sector GVA growth too slowed to 3.3 per cent from 8.5 per cent earlier. Mining sector growth was recorded at 0.1 per cent as against 2.2 per cent contraction a year ago.
Electricity, gas, water supply and other utility services growth also slowed to 3.6 per cent from 8.7 per cent a year ago. Similarly, trade, hotel, transport, communication and services related to broadcasting growth was also down to 4.8 per cent in the second quarter from 6.9 per cent a year ago.
Financial, real estate and professional services growth slowed to 5.8 per cent in the Q2 from 7 per cent a year ago. On the other hand, public administration, defence and other services reported improvement with an 11.6 per cent rise during the quarter under review from 8.6 per cent last year.
On a half-yearly basis (April-September 2019), GDP growth came in at 4.8 per cent as compared to 7.5 per cent in the same period a year ago. “GDP at constant (2011-12) prices in Q2 of 2019-20 is estimated at Rs 35.99 lakh crore, as against Rs 34.43 lakh crore in Q2 of 2018-19, showing a growth rate of 4.5 per cent,” an NSO statement said.
Gross Fixed Capital Formation (GFCF), which is barometer of investment, at constant (2011-2012) prices, estimated at Rs 10.83 lakh crore in Q2 of 2019-20 as against Rs 11.16 lakh crore in Q2 of 2018-19. In terms of GDP, the rates of GFCF at Current and Constant (2011-2012) prices during Q2 of 2019-20 are estimated at 27.3 per cent and 30.1 per cent, respectively, as against the corresponding rates of 29.2 per cent and 32.4 per cent, respectively in Q2 of 2018-19.
“Growth rates of GFCF at Current and Constant Prices are estimated at (-) 0.9 per cent and (-) 3.0 per cent during Q2 of as compared to 16.2 per cent and 11.8 per cent during Q2 of 2018-19,” it added.
The Congress took a swipe at the BJP Government over the GDP growth falling to 4.5 per cent, saying the declining numbers are a reflection of a failed “Modinomics” and a “Pakoda Economic Vision”.
Congress’ chief spokesperson Randeep Surjewala alleged that for the BJP, the GDP was “Godse Divisive Politics” as he sought to bolster his attack by using the ongoing row over BJP MP Pragya Thakur’s remarks.
“India’s GDP has collapsed to an abysmal 4.5%. We are in a virtual free-fall. This is the lowest GDP quarter in 6 years. But why is the BJP celebrating? Because their understanding of GDP (Godse Divisive Politics) suggests double digit growth levels. All in the perspective,” he said on Twitter.
As many as six of eight core industries saw a contraction in output in October. Coal production fell steeply by 17.6 per cent, crude oil by 5.1 per cent, and natural gas by 5.7 per cent. Production of cement (- 7.7 per cent), steel (- 1.6 per cent), and electricity (- 12.4 per cent) also declined during the month.
The only sector that posted growth in October was fertilizers where production increased by 11.8 per cent year-on-year. Growth in output of refinery products slowed down to 0.4 per cent in October as against 1.3 per cent in the same period last year. The eight core sectors had expanded by 4.8 per cent in October 2018.
In September, the government decided to lower tax rate for corporates and has pegged that it will have an impact of Rs 1.45 lakh crore on its revenue mobilisation.
Saturday, 30 November 2019 | PNS | New Delhi
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