NEW DELHI: The GDP growth in the first quarter (Q1) of the current financial year 2019-20 has further dropped from the fourth quarter of last year at 5.8 per cent to a multi-year low of just 5 per cent.
The financial year 2018-19 had ended with overall GDP growth rate of 6.8 per cent. With the new announcement, India’s GDP growth has been slowing down for five quarters in a row though it was widely expected that the Q1 GDP would be below 6 per cent.
The announcement of the lowest GDP growth in at least six years or so couldn’t be more ill-timed as the debate on making the country a $5 trillion economy has been gaining momentum of late.
The detractors of the present government could very well use the dismal performance on the GDP front to raise uneasy questions on the government’s economic policies in the past more than five years.
They argue that the decline in national income also validates the recent ominous observations made by NITI Aayog and the warnings issued by the Monetary Policy Committee (MPC) on the worsening growth scenario.
The GDP at Constant (2011-12) Prices in Q1 of 2019-20 is estimated at Rs35.85 trillion, as against Rs34.14 trillion in Q1 of 2018-19, showing a growth rate of only 5 per cent, news agency ANI reported.
Manufacturing, poor performer
A close look at the numbers shows that the manufacturing has let down the GDP performance in a big way.
It grew at just 0.6 per cent barely escaping the negative territory as against a growth of 12.1 per cent it recorded a year ago.
This is the real problem area because manufacturing is the backbone of the economy and directly connects to employment. In the previous quarter, the growth was at 3.1 per cent.
Last week, the Finance Minister Nirmala Sitharaman announced that banks had agreed to pass on the full benefits of the RBI’s rate cuts to consumers.
This move – aimed at increasing purchasing power and thus, boosting demand — was among a series of announcements Sitharaman made to overcome the slowdown in the economy.
The other announcements included the withdrawal of a ‘super-rich surcharge’ imposed on foreign investors, exemption of start-ups from ‘angel tax’, infusion of Rs70,000 crore upfront in public sector banks, and a couple of specific measures aimed at helping the ailing auto sector.
A few days back, RBI announced that it had accepted the Jalan committee report that recommended the transfer of Rs 1.76 lakh crore from its surplus to the government coffers. This is likely to prop up public investment, which, many economists say, is the way out of the current economic gloom.