India’s GDP Growth has Dropped to 5% for First Quarter of FY20, Slowest in 6 Years

            The latest GDP figures confirm the sagging growth in India’s economy. Credit Pixelbay

NEW DELHI: India’s economy grew at its slowest pace in over six years in the June quarter following a sharp deceleration in consumer demand and tepid investment. The government has already announced a series of measures in the past week as part of its efforts to put growth back on track.

The gross domestic product (GDP) growth rose just 5% for the quarter ended June 2019, in a development that reinforces concerns over a slowing down of the Indian economy.

Lower growth, data shows, is primarily due to a sharp deceleration in the manufacturing sector and sluggish agriculture output. In addition to this, ‘consumption growth’ was also weak – private final consumption expenditure growth fell to 3.1% in Q1 FY20 as compared to 7.2% in the previous quarter.

China’s economy grew 6.2% in the June quarter.

The nominal GDP growth, a measure of GDP without adjusting for inflation, rose just 8%, the least in the current series of national accounts going back to FY12, indicating a deep slowdown. Comparing across different series, it could be the lowest since FY03, economists said. Consumption, the bedrock of growth in the past few years, collapsed to an 18-quarter low of 3.1% from 10.6% in the March quarter, pointing to fragile sentiment. Investments grew 4%, up from 3.6% in the previous quarter.

Lower growth, data shows, is primarily due to a sharp deceleration in the manufacturing sector and sluggish agriculture output. In addition to this, ‘consumption growth’ was also weak – private final consumption expenditure growth fell to 3.1% in Q1 FY20 as compared to 7.2% in the previous quarter.

The numbers that were released on Friday are below general market expectations: most estimates had predicted that Q1 growth would be between 5.7-5.8%

Growth is down compared to the 5.8% recorded in Q4 FY19 and the 8% that the Indian economy hit one year ago in Q1 FY19.

Financial Quarter

GDP Growth 

Q1 2018-19 (April-June)

8.0%

Q2 2018-19 (July-Sep)

7.0%

Q3 2018-19 (Oct-Dec)

6.6%

Q4 2018-19 (Jan-March)

5.8%

Q1 2019-2020 (April – June)

5.0%

The last time that quarterly data was this low was in the Q1 of FY13, when GDP growth was recorded at 4.9%.

“Q1 FY20 GDP growth at 5.0% was 25 quarter low. The growth slowdown was led by private final consumption expenditure, which grew 3.1% only (18 quarter low). Investment demand also remained lackluster and fixed capital formation grew 4.0% (4QFY19: 3.6%). Only government expenditure provided support to growth and increased 8.8%,” said Devendra Pant, chief economist, India Ratings and Research (Fitch Group), in a statement.

“While general elections in April-May 2019 had some impact on investment growth, collapse of private consumption demand from 10.6% in 4QFY18 to 3.1% in 1QFY20 is real cause of concerns. Both structural and cyclical issues are plaguing Indian economy and in order to bring economy back to a respectable growth path both short-term and long term measures are required,” the statement added.

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