GDP growth slips: Economy on red alert but govt in denial

India’s July-September 2019 (Q2) gross domestic product (GDP) growth rate fell to 4.5 per cent, the lowest in more than six years, compared with 7.1 per cent in the same quarter of 2018-19, government data showed on Friday. The low rate of expansion was mainly on account of a weak manufacturing, falling consumer demand and private investment, and a drop in exports due to a global slowdown.

In the previous quarter (April-June 2019), the country’s economic growth had stood at a seven-year low of 5 per cent, against 8 per cent Q1 growth a year earlier.

Gross value added (GVA) growth during the second quarter stood at 4.3 per cent, against 4.9 per cent in April-June this year and 6.9 per cent in the September quarter last year. Gross fixed capital formation at current prices declined sharply to 1.02 per cent, compared with 11.8 per cent in the same quarter last year.

For the first six months of the year (April-September 2019), the economic groth came to 4.8 per cent, against 7.5 per cent in the same period last year.

In another sign of pain in the economy, official data released on Friday showed that India's fiscal deficit in the first seven months through October stood at Rs 7.2 trillion, or 102.4 per cent of the budgeted target for the current financial year. Besides, the output of eight core infrastructure industries in the economy contracted by 5.8 per cent in October, indicating the severity of the economic slowdown, another set of official data released on Friday showed.

Raising slowdown concerns, the economists Business Standard had spoken to earlier had concurred that the economic growth rate in Q2 of this year would be between 4.2 per cent and 4.7 per cent, slower than the 5 per cent in Q1. In view of slowing rates of growth, the Reserve Bank of India (RBI) had earlier lowered its GDP growth projection for full 2019-20 financial year to 6.1 per cent from 6.9 per cent forecast previously.

Broadly in line with economists’ estimates, the Q2 GDP growth rate this year is the lowest quarterly rate since the 4.3 per cent clocked in January-March quarter of 2012-13, the year when the new GDP series had kicked in. At the time, India had been battling high inflation and political turmoil, besides global economic pressures.