GDP growth slows to 6-year low

New Delhi: India's GDP growth for second quarter slowed sharply to 4.5 per cent, the weakest pace in more than six years, as manufacturing output hit a slump and consumer demand as well as private investment weakened.

The Gross Domestic Product (GDP) expansion rate moderated from 5 per cent recorded in April-June 2019 and is much weaker than the 7 per cent growth registered in July-September 2018, according to official data released Friday.

The major factor in the GDP fall was manufacturing contracting by 1 per cent. A separate data showed core infrastructure industries' output declining 5.8 per cent in October, the biggest contraction since at least 2005.

The GDP growth rate in the second quarter of the current fiscal year (April to March) is the slowest since January-March 2013, and marks six consecutive quarters of slowing growth — a first since 2012.

This despite the Narendra Modi-led government taking several steps — including slashing corporate taxes, setting up a special real-estate fund, merging banks and announcing the biggest privatization drive ever — to revive investment climate and bolster economic growth.

Also, the Reserve Bank of India (RBI) has cut interest rates five times so far in 2019, by a total of 135 basis points, to boost liquidity in the financial system amid concerns that growth momentum is slowing down. There is an expectation that the central bank may slash interest rate again at its monetary policy meeting next week.

Some surveys show business confidence is at multi-year low. For the first half of FY 2019-2020, the GDP growth slowed to 4.8 per cent, against 7.5 per cent recorded in the first half of 2018-19.

India was the world's fastest-growing economy until last year but a crisis among non-banking finance institutions — a key source of funding for small businesses and consumers — weak rural spending and a global slowdown have since led to steady deline in growth rate. Government data also showed that country's fiscal deficit has hit 102.4 per cent of 2019-20 Budget Estimate at Rs 7.2 lakh crore at the end of October. The fiscal deficit or the gap between expenditure and revenue was at Rs 7,20,445 crore as on October 31, 2019, according to the data released by the Controller General of Accounts (CGA).

The deficit was at 103.9 per cent of 2018-19 Budget Estimate (BE) in the corresponding month a year ago.

The government has estimated the fiscal deficit for the current financial year at Rs 7.03 lakh crore, aiming to restrict the deficit at 3.3 per cent of the gross domestic product (GDP).