NEW DELHI: The country economy grew at its slowest pace in 26 quarters or six-and-a-half years in the July-September period of the current fiscal year, dragged down by contraction in the crucial manufacturing sector, piling pressure on the government to unleash fresh measures to revive growth and lift sentiment.
Data released by theNational Statistical Office(NSO) on Friday showed gross domestic product (GDP) grew by 4.5% in the September quarter, slower than 5% in the previous quarter and the lowest since the 4.3% expansion in the January-March quarter of 2012 – 13.
The manufacturing sector contracted 1% in the September quarter, the first decline in nine quarters, highlighting the lack of demand in the economy. This is in line with the contraction in factory output and core sector numbers.
Separate data released on Friday showed the eight core sectors spanning coal, crude oil, natural gas, refinery products, fertiliser, steel, cement, electricity, which account for 40% of the index of industrial production, contracted 5.8% in October, its sharpest slide in the new data series with 2011 – 12 as the base year. This means that the weakness has continued in the third quarter too.
The slowdown also triggered a political slugfest with former PMManmohan Singhterming the 4.5% number unacceptable. Chief economic adviser Krishnamurthy Subramanian said the fundamentals of theIndian economycontinued to be strong.
Economists said they expect some pick-up in the quarter ahead but pegged overall growth for 2019 – 20 in the 5.5-5.6% range, way below the 7% growth estimated earlier.
“The economy is estimated to see higher growth in the second half of the fiscal year. We estimateGDP growthof 6.3% in the second half of 2019 – 20 .The GDP growth for the whole year is pegged at 5.5-5.6%, “said Madan Sabnavis, chief economist at Care Ratings .
He said that barring public administration, growth in all the other broad sectors of the economy slackened. Public administration, defense and other services grew by over 11%, the highest growth in the last 9 quarters.
“On excluding public administration, defense and other services, which account for a 12% share in GVA, the growth in gross value added (GVA) during Q2 2019 – 20 at 3.2% was the lowest since 2012 – 13. This indicates that the public sector propelled growth during the quarter gone by, “said Sabnavis.
Experts said that the latest data puts in doubt the country goal of emerging as a $ 5 trillion economy by 2024 – 25.
“For the emerging market leader economy of India, which has grown in excess of 7.5% per annum for 20 years, a full year growth of less than 5% is more like a recession than a slowdown, “said Subhash Chandra Garg, former finance secretary. “India has rightly declared its ambition to be a $ 5 trillion dollar economy by 2024 – 25 and a $ 10 trillion dollar economy by early 2030 s. The goal of $ 5 trillion dollar economy by 2024 – 25 seems to have slipped by a year given this year tepid growth of less than 5%, “said Garg in his blog.
In terms of quarterly growth, India has lost the tag of the fastest growing economy to China which posted a growth of 6% in the September quarter, the slowest pace in 27 – and-a-half years as expansion was hurt by the US-China trade war.The global economy is also facing a slowdown and this has hurt demand for India’s exports which have slumped in recent months.