Published: Sat, August 31, 2019
Finance | By Kristine Clayton

GDP shocker: At 5%, Indian economy grows slowest in over six years

GDP shocker: At 5%, Indian economy grows slowest in over six years

In its third bi-monthly monetary policy the RBI said real GDP growth for 2019-20 is revised downwards from 7.0 per cent in the June policy to 6.9 percent - in the range of 5.8-6.6 percent for H1:2019-20 and 7.3-7.5 percent for H2 - with risks somewhat tilted to the downside; GDP growth for Q1:2020-21 is projected at 7.4 percent. "A decline in the GDP growth rate could mean a decline in the employment rate", he said.

Chief Economic Advisor Krishnamurthy Subramanian, however, attributed the slowdown chiefly to a global economic downturn.

The first quarter estimates are based on agricultural production during Rabi season of 2018-19, government said.

One of the reasons behind the huge slump in the economy is the weak consumer demand and dip in private investments. It also creates ample room for the central bank to respond to the sustained economic slowdown with deeper interest rate cuts.

Even as India's growth rate for April-June 2019 slipped to 5 per cent compared to 8 per cent in the corresponding period a year ago, Chief Economic Adviser K V Subramanian Friday said the government is taking various steps to boost economic expansion. So reviving real estate sector would be crucial both from the investment as well as consumption point of view, he noted.

"While the fiscal space to undertake counter-cyclical measures are very limited, we believe, the government would undertake some measures to provide a short-term boost to the economy", he said.

Private final consumption expenditure saw a flat growth and rate stood at 55.1 per cent as against 56.1 per cent, while government final consumption expenditure grew fairly robust at Rs 4.22 lakh crore from Rs 3.88 lakh crore, with its rates remaining flat at 11.8 per cent. Investments (gross fixed capital formation) grew at 4 per cent, reflecting poor sentiment among investors and big companies. It has already cut the repo rate by a cumulative 110 basis points this year. The government and the RBI have recently initiated numerous measures to improve the growth situation.

She said the government was "cautiously optimistic" about reviving the growth till now, but can not be in a state of "denial" anymore, and added that the data for the second quarter will also paint a slower economic growth.

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