India’s GDP growth slumped to a seven-year low of 5 per cent in the first quarter of this fisca
India’s GDP growth slumped to a seven-year low of 5 per cent in the first quarter of this fiscal, pulled down mainly by a sharp deceleration in manufacturing output and subdued farm sector. This was much lower than an expectation of 5.7 per cent growth rate in the April-June quarter.
Soon after GDP data was released, Chief Economic Adviser K.V. Subramanian said the slowdown in the growth was due to both endogenous and exogenous factors.
“Quarterly GDP estimates show that India’s GDP growth, while high, has shown some slowdown. This is due to both endogenous and exogenous factors. Impact comes, especially, from global headwinds due to deceleration in developed economies, Sino-American trade conflict etc. Similar phenomena have also been observed previously before during Q4 (2012-13) and Q4 (2013-14), when growth was around 5%. Electricity & power generation, which is a leading indicator across the world, grew by 8.6% - a good sign of green shoots towards higher growth,” he said.
He added that the government’s final consumption, private final consumption and investment grew by 8.7 per cent, 3.1 per cent and 4 per cent in real terms.
Noting the increase in capacity utilization, which stood at 76 per cent, combined with bottoming out of investment cycle, he expressed optimism and said these were are noteworthy.
“As Economic Survey shows, investment is ‘critical driver’ of economy with consumption being a key ‘force multiplier’. Together with steps taken by the government for banks and financial sector, and structural reforms, investment should continue improving and drive economy to higher growth,” Subramanian said.
According to official data, the gross value added (GVA) growth in the manufacturing sector dropped to 0.6 per cent compared to 12.1 per cent expansion in the similar period last year. Farm sector GVA growth was 2 per cent as compared to 5.1 per cent in the first quarter of last fiscal. Construction sector GVA growth too slowed to 5.7 per cent from 9.6 per cent earlier. However, mining sector growth increased to 2.7 per cent from 0.4 per cent in Q1 FY19.
Chairman of the Economic Advisory Council to the Prime Minister (EAC-PM), Bibek Debroy, said that a lot of unnecessary negativism was being generated about the economy. He said while it was true that there are global uncertainties and net exports cannot, right now, be a major growth driver for India, yet in 2019-20, real GDP growth was expected to be between 6.5 and 7 per cent.
“When many countries in the world are struggling to find positive growth, 6.5 to 7 per cent is not to be lightly dismissed,” he said.
Debroy stressed that those who seek to spread a message of gloom and doom were doing a great disservice.
“The EAC-PM does not endorse such views. While constructive criticism and suggestions are welcome, a message of despair and hand-wringing is best avoided,” he said.