Growth slips: Slowdown in farm, manufacturing push India’s GDP growth down to 6.6%

Growth slips: Slowdown in farm, manufacturing push India’s GDP growth down to 6.6%

India News

With manufacturing, agriculture and small services faltering and government spending slowing, India’s gross domestic product (GDP) grew at a five-quarter low rate of 6.6% in the September-December period (Q3) of the current fiscal, official data revealed on Thursday.The Central Statistics Office (CSO) also revised down the growth rates for Q1 (from 8.2% to 8%) and Q2 (from 7.1% to 7%) and also that for the full fiscal year to 7% — a five-year trough — from 7.2% in the first advance estimate released in January.While the fall in growth rates, given a loss of momentum observed since Q2, including in the high-frequency data available for post-Q3 period (eight core infrastructure industries growth declined to a 19-month low at 1.8% in January and services PMI fell for the second straight month), economists predicted the growth to be more anaemic in Q4 at 6.1-6.4%, with a recovery to be expected in Q1 next year or thereafter.The upward revision in nominal GDP for FY19 to Rs 190.54 lakh crore in the second advance estimate from Rs 188.41 lakh crore announced in the first advance estimate would contain FY19 fiscal deficit at 3.3% of GDP, the original target, against the revised estimate of 3.4%, if other budget numbers hold good.Along with the change in growth rates, the CSO also undertook significant revisions of the relative strengths of the various components of the economy. For instance, while the annual growth in private consumption expenditure was earlier stated to have slowed from 8.6% in Q1 to 7% in Q2, as per Thursday’s data, this largest pillar of the economy expanded from 6.9% in Q1 to 9.8% in Q2 and then slowed to 8.4% in Q3. Also, fixed investment, which was assumed to have picked up and grown at 12.5% in Q2 from 10% in the previous quarter, is now seen to have slowed from Q4 last year (14.4%) to Q2 (10.2%) before recording a mild recovery in Q3 (10.6%).Gross value added grew just 6.3% in the third quarter, against 6.8% in the previous quarter. However, growth in financial services accelerated for a third straight quarter, from just 5% in Q4FY18 to 7.3% in the December quarter. Net exports continue to remain a drag on the GDP, although its impact has eased a tad in the third quarter. A pick-up is visible in the construction sector. In the near term, a moderate boost to consumption due to the Rs 20,000 crore income-support scheme for farmers and some direct (IT reliefs announced in Budget) and indirect tax (GST cuts for housing) reliefs is seen to be a positive for growth along with the 0.25% cut in the repo rate by the RBI in the policy review earlier this month. Also, the fact that capacity utilisation in many firms has reached the 80% threshold where they typically start fresh investments also bodes well for the economy.A slowing of overall government spending (Centre’s capex in April-January this year was down 13% from a year ago; farm loan waivers may hit the state’s ability to keep capex at budgeted levels; PSUs’ ability to prop up investment demand has got reduced too) is however a potential dampener.Aurodeep Nandi, India economist at Nomura, said the lower growth rate essentially shows the cyclical slowdown entrenching itself. “Going ahead we do expect further moderation on tighter financial conditions, weaker global demand and political uncertainty.”
Courtesy : Financial Express