New Delhi: A severe slowdown in manufacturing has pulled India's first quarter growth rate to 5 per cent, marking the fourth successive quarter of decline on the trot.
The slowdown, manifest in sales of cars to biscuits and lakhs of job cuts across sectors, is attributed to a weak consumer demand and sluggish private investments.
This is also the slowest GDP growth in the last six years. From 8 per cent during Q1 2018-19 to 5 per cent in this quarter, the GDP has fallen by three per cent in barely a year.
On a sequential basis, the growth rate is lower than the 5.8 per cent in Q4 of 2018-19.
These figures were put out by the Central Statistical Office on Friday Ahead of the official release of the GDP numbers, most research firms had predicted muted growth in the previous quarter and revised downward their forecast for FY20. To that extent, their worst fears have come true.
A Goldman Sachs report recently said that the current slowdown has lasted for 18 months as of June, 2019, making it the longest episode since 2006.
It further said that policymakers have acted to address the current slowdown but policy responses seem less aggressive compared with those in earlier episodes.
The RBI annual report on Thursday had described the current slump as a cyclical rather than a structural slowdown. Both require different policy responses: while a cyclical downswing can be addressed by doses of fiscal stimulus, structural issues can only be tackled by ushering in urgent reforms.
But even though the RBI annual report says that there is no need for undue alarm as we may be passing through a cyclical soft patch, it admits that there are a host of structural issues that still need to be addressed.
The government, acutely aware of the malaise, has within a span of one week announced a series of steps - from waving of higher taxes on foreign investors to recapitalising state-run banks.
According to the National Statistical Office, the GDP at 'Constant (2011-12) Prices' in Q1 of 2019-20 is estimated at Rs 35.85 lakh crore, as against Rs 34.14 lakh crore in Q1 of 2018-19, showing a growth rate of 5 per cent.
Besides, the data showed that the gross value added (GVA) growth rate during the first quarter of 2019-20 on a year-on-year (YoY) basis fell to 4.9 per cent, from 7.7 per cent during the corresponding period of the previous fiscal.The GVA includes taxes, but excludes subsidies.