In signs of the Indian economy losing steam ahead of the general elections, GDP growth slowed to a five-quarter low of 6.6 per cent in October-December on the back of lower farm and manufacturing growth and weaker consumer demand, Government data showed on Thursday.
Also, economic growth estimate for the current fiscal year ending March 31 has been revised downwards to 7 per cent from the earlier estimate of 7.2 per cent. This is the lowest growth in the last five years.
However, the third quarter growth rate, which was lower than the revised estimate of 7 per cent in the previous quarter and 8 per cent in April-June, was faster than China’s 6.4 per cent growth for the three months to December 2018. India thus retains its tag of the world’s fastest-growing major economy.
Data from the Central Statistics Office (CSO) showed slower consumer spending at 8.4 per cent as compared to 9.9 per cent in the previous quarter. Farm sector growth slowed to 2.7 per cent from 4.2 per cent in Q2 and 4.6 per cent in Q1.
The Reserve Bank of India (RBI) had earlier this month cut the key interest rate by 25 basis points and changed its policy stance to “neutral” from “calibrated tightening”, saying the shift provides flexibility and room to address challenges to the sustained growth of the Indian economy over the coming months.
Parallelly, eight core infrastructure industries’ growth in January declined to a 19-month low of 1.8 per cent (December 2018: 2.7 per cent, January 2018: 6.2 per cent) on contraction in refinery products and electricity. Electricity sector, which last witnessed a contraction in February 2013, posted a growth of (-) 0.4 per cent in January — the lowest in the last 71 months.
Devendra Kumar Pant, chief economist at India Ratings, said size of the economy (nominal GDP) in FY19 is now estimated at Rs 190.54 lakh crore compared to Rs 188.41 lakh crore, which “will help government to achieve fiscal deficit/GDP target for FY19 even though the fiscal deficit till January 2019 is 121.5 per cent of FY19 (revised estimate).”
FY19 GDP growth at 7 per cent “indicates that the economy is losing steam,” he said, adding the GDP growth in Q4 has to be 6.5 per cent to attain overall 7 per cent growth in FY19. “This on the face of it looks plausible; however, unless exports in Q4 grow 14 per cent, attaining 7 per cent growth will be difficult.”
According to CSO, while agriculture is estimated to grow at 2.7 per cent, manufacturing growth is expected to accelerate to 8.1 per cent in 2018-19. However, trade, hotel and transportation sector growth is expected to decelerate to 6.8 per cent during the year.
The Gross Domestic Product (GDP) at constant prices (2011-12) had grown at 7.7 per cent in the October-December quarter of the previous financial year. The growth rate was revised upwardly from 7 per cent.
“GDP at Constant Prices in Q3 of 2018-19 is estimated at Rs 35 lakh crore, as against Rs 32.85 lakh crore in Q3 of 2017-18, showing a growth rate of 6.6 per cent,” the CSO said.
The CSO also revised GDP growth figures for April-June and July-September quarters of this fiscal to 8 per cent and 7 per cent from 8.2 per cent and 7.1 per cent.
The GDP growth rates for April-June and July-September of last fiscal were also revised to 6 per cent and 6.8 per cent from 5.6 per cent and 6.3 per cent, respectively.