New Delhi: India’s Gross Domestic Product (GDP) growth rate for the second quarter of the ongoing financial year fell to 4.5%. This is the lowest since the January-March quarter of 2013.
The nominal GDP growth for the second quarter also fell to 6.1% as compared to 8% in the previous quarter. The GVA growth also dipped to 4.3% in comparison with 4.9% in the first quarter of the ongoing financial year.
Growth figures for the previous quarter had dipped to 5%, to an over six-year low. GVA growth too had fallen to 4.9% in the last quarter as compared with 6.9% in the same period last year.
This is the fifth consecutive quarter to have witnessed a fall.
The manufacturing sector also witnessed negative growth in the second quarter of the ongoing financial year. Once considered the backbone of the economy, the sector grew at -1% in the July-September quarter.
Ahead of the release of the numbers, government data released showed that the output of eight core infrastructure industries contracted by 5.8% in October, indicating the severity of the economic slowdown.
The latest macroeconomic numbers do not add up to a positive expectation of growth for the current quarter as well. Industrial production shrank by 4.3% in September, registering the weakest performance in seven years due to output decline in manufacturing, mining and electricity sectors.
Extended monsoon seasons, particularly heavy rains in October and November, have damaged crops in several parts of India. This has also resulted in rising prices of vegetables, such as onions and tomatoes, in the last two months, accelerating food inflation to nearly 8% in October from a year ago.
The Reserve Bank of India (RBI) has reduced interest rates by a cumulative 135 basis points this year to 5.15% and it is expected to cut the repo rate in December as well for the sixth time in a row. According to the central bank's last monetary policy report, the total flow of funds to the commercial sector contracted by a massive 87.6% over April to mid-September 2019 (YoY).
“Economic growth may have slowed but there is no recession, there can be no recession,” Finance Minister Nirmala Sitharaman had told the Rajya Sabha during a discussion on the economic situation in the country earlier this week.
The government is taking every step towards the development of the economy as it has to be given a lot of support, she had added. Presenting the numbers between five years under the Congress-led United Progressive Alliance-II (UPA) regime from 2009 to 2014 and the BJP’s first term from 2014 to 2019, she said the inflation was lower and growth higher under the present government.
Meanwhile, the GDP growth numbers will also show how investments in the economy have fared this quarter. Data from the Centre for Monitoring Indian Economy has shown that the country has seen new investments worth only Rs 1.2 trillion in April-September, the lowest in absolute terms in the past seven years.
Prime Minister Narendra Modi's government has taken several steps, including cutting corporate tax in September, to boost investments and bolster economic growth.
However, ongoing agrarian distress and dismal income growth so far, have weakened the consumption demand considerably. Even the festive demand has failed to revive it and this is reflected in the current data of non-food credit, auto sales and select fast moving consumer goods.