GDP growth falls to over six-year

low of 5% in June quarter

The RBI had lowered its outlook for the fiscal year 2019-2020 at its
August meeting. Slowdown in growth due to endogenous and
exogenous factors, says Chief Economic Adviser K.V. Subramanian

Indian economy or GDP expanded at lower-than-expected 5%

year on year in the April-June quarter, the slowest in over six
years, driven by weak investment growth and sluggish demand. In
the March quarter, Indian economy at expanded 5.8%. Economists
in a Reuters poll had expected GDP to grow at 5.7% in the June
quarter.
The manufacturing sector grew at just 0.6% while ‘Agriculture,
Forestry and Fishing’ sector at 2%. The ‘Mining and Quarrying’,
‘Construction’ and ‘Financial, Real Estate and Professional
Services’ grew at 2.7%, 5.7% and 5.9%, respectively, during this
period.
The RBI had lowered its outlook for the fiscal year 2019-2020 at
its August meeting. It has repo rate by a combined 110 basis
points since February. With inflation staying benign, analysts
expect the central bank to ease rates further.

Slowdown in growth due to endogenous and exogenous factors,

said Chief Economic Adviser K.V. Subramanian after GDP data
release.
"Given the indications we have seen in the past few months,
growth was expected to be slow. However, 5% is far below street
estimates of 5.6%-5.7% and does come as a surprise. This was
primarily driven by lower growth in private consumption.
Manufacturing growth staying almost flat is also worrying and
immediate steps are needed to revitalise this sector. An overall
recovery may take another couple of quarters as the NBFC sector
is still recovering from the liquidity crisis," Gourav Kumar,
principal research analyst at fundsindia.com, Chennai, told
Reuters.
A host of high frequency indicators like auto sales continue to
weaken. Domestic passenger vehicle sales in July dived at the
steepest pace in nearly two decades and declined for the ninth
straight month in July. In addition, the risk of further escalation of
the US and China trade war are weighing on demand and business
confidence in India.

"National accounts data is consistent with the picture suggested by

leading indicators for Q1, FY20. GDP growth has decelerated to
5% - the lowest since Q4, FY13. "There is an acute slowdown in
the manufacturing and agri sectors on the back of a slowdown in
aggregate demand - both consumption and investment demand.
Except for mining activity and power generation, all other
productive sectors have slowed on a y-o-y basis. In our opinion,
the weight of structural factors has gone up in the slowdown and
mere monetary stimulus may not work beyond a limit," Rupa
Rege Nitsure, group chief economist, L&T Financial Holdings,
Mumbai, told Reuters.
Last week, Finance Minister Nirmala Sitharaman announced a
number of steps to revive economic growth and shore up market
confidence, including rolling back recent tax hikes on foreign and
domestic equity investors and several measures for industries.

The government earlier this week further liberalised foreign direct

investment (FDI) rules in many sectors, in an effort to get
economic growth back on track.
The government allowed 100% foreign investment for coal
mining, associated infrastructure and sales of fuel.
Separately, India's fiscal deficit in the four months through July
stood at ₹5.48 trillion or 77.8% of the budgeted target, for the
current fiscal year, separate government data showed today.
Net tax receipts in the first four months of the fiscal year were
₹3.39 lakh crore, while total expenditure was ₹9.47 lakh crore,
government data showed.
The government has set a fiscal deficit target of 3.4% for 2019/20,
same as 2018/19.