India GDP growth hits 6-year low, raises stimulus hopes
Falling for fifth straight quarter, India's Gross Domestic Product (GDP) slipped to six-year low of 5 per cent for the April-June quarter of fiscal year 2019-20. The data released by the Central Statistics Office on Friday showed that GDP rose by 5 per cent compared to growth of 5.8 per cent in Q4FY19.
GDP growth at just 5 per cent is the lowest since the Q4FY13, when it had slumped to 4.3 per cent. What’s worrying is that it is the first time since Q4FY13 that India has recorded two consecutive quarters of below 6 per cent growth.
In gross value added terms, the economy grew at 4.9 per cent in the June quarter this fiscal year, compared to 5.7 per cent last quarter. The fall is attributed to weakening of global environment leading to weak consumer demand and slow private investment in the country.
All is not well and this is highlighted by the industrial growth that was weighed down by manufacturing, mining and construction. Manufacturing sector marked its growth falling to 0.6 per cent in the June quarter compared to 3.1 per cent in the last quarter. The mining and quarrying sector marked growth at 2.7 per cent in Q1FY20 compared to 4.2 per cent in Q4FY19. Construction grew at 5.7 per cent in Q1FY20 compared to 7.1 per cent in Q4FY19. The financial services sector grew at 5.9 per cent in Q1 compared to 9.5 per cent in the previous quarter. The public administration segment grew at 8.5 per cent in Q1FY20 as against a growth of 10.7 per cent in Q4FY19.
However, there were some green shoots as some sectors performed better than expected. Among the sectors that marked positive growth were - the electricity segment that saw stronger growth compared to the preceding quarter. Data showed that electricity and other public utilities grew by 8.6 per cent in Q1 as against 4.3 per cent last quarter. Meanwhile, trade, hotel, transport, communication sector growth stood at 7.1 per cent in Q1 compared to 6 per cent in the previous quarter. Agriculture grew at 2 per cent in Q1 compared to a contraction of 0.1 per cent in the preceding quarter.
Apart from a poor show by industrial segments, private consumption too reflected a poor show. The private final consumption expenditure grew by 3.1 per cent in Q1FY20 compared to 7.2 per cent in Q4FY19. On the other hand, gross fixed capital formation that reflects investments grew at 4.4 per cent in Q1FY20 as against 3.6 per cent in Q4FY19.
Weakening demand and slower growth hint at more stimulus announcement by the government to boost the economy. Moreover, there are higher hopes of more rate cuts by the Reserve Bank of India to trigger growth in consumption.