Related Topics: Indian Economy, GDP
- India’s economy grew by merely 5 per cent in the April-June quarter, down from 5.8 per cent in the previous quarter, according to GDP data released by National Statistical Office (NSO).
- The previous low in GDP growth was recorded at 4.3 per cent in the January-March quarter of 2012-13.
Quarterly GDP Estimate
- The data show that the manufacturing sector grew at an anaemic two-year low of 6% in the first quarter of 2019-20, down from 12.1% in the same quarter of the previous year.
- The agriculture sector also saw a dramatic slowdown in growth to 2% from 5.1% over the same period.
- The plight of the real estate sector was also highlighted by the slowdown in its growth rate to 7% in the first quarter of this financial year, compared with 9.6% in the same quarter of 2018-19.
- The growth slowdown was led by private final consumption expenditure, which grew 3.1% only.
- Investment demand also remained lacklustre and fixed capital formation grew 4%.
- Only government expenditure provided support to growth and increased 8.8%.
- Electricity and power generation grew by 8.6%, compared with7% in the same quarter of the previous year.
Reasons for Slowdown
- Slowdown in India’s GDP growth is due to both endogenous and exogenous
- The impact from global headwinds due to the deceleration in developed economies and the Sino-American trade conflict are some of the exogenous causes.
- India’s problem lies in the sharp decline in consumption demand even as investment demand continued to remain weak.
- The collapse of private consumption demand from 10.6% in the fourth quarter of financial year 2017-18 to 3.1% in the first quarter of financial year 2019-20 is a real cause of concern.
- Manufacturing growth is the chief reason for the low level of performance and the high level of layoffs and the problem here seems to be more on the demand side.
- The government has recently announced a whole host of measures to help revive the economy, aimed at easing tax rules for foreign portfolio investors, start-ups, increasing credit outflows by the banks and NBFCs, increasing demand for the auto sector, and liberalising the foreign direct investment rules for single-brand retail.
- Finance Minister also announced a slew of banking reform measures, including merging 10 banks into four entities.
- As the Economic Survey 2019 suggests, investment is a critical driver of the economy with consumption being a key force multiplier.
- Together with steps taken by the government for the banks and the financial sector, and structural reforms, investment should continue improving and drive economy to higher growth.
- India requires significant investment in infrastructure, manufacturing and agriculture for the rapid growth rates of the last fifteen to twenty years to be sustained.
- In order to fulfil this it needs to create a robust financial structure that can serve the needs and demands of growing nation.