GDP Growth for Q1 Hits 24-Quarter Low at 5% as Manufacturing Takes a Beating

New Delhi: The Central Statistical Office (CSO) in its official release on Friday said that India's quarterly GDP has come down to 5 per cent as compared to 5.8 per cent in the last quarter of the financial year. The figure stood at 7.8 per cent in the same quarter of the previous financial year.

Manufacturing sector and private consumption are being blamed for the slump.

Ahead of official release of GDP numbers, most research firms had predicted muted growth in the previous quarter and had revised downward their forecast for FY20.

Cutting down FY20 GDP growth to 6.7 per cent (six-year low) from its earlier forecast of 7.3 per cent, India Ratings and Research (Ind-Ra) on August 28 said that the current fiscal would be the third consecutive year of subdued growth. It attributed the lacklustre performance primarily to a slowdown in consumption demand, delayed monsoon, decline in manufacturing and rising global trade tensions affecting exports.

"Even on a quarterly basis, 1Q FY20 is expected to be the fifth consecutive quarter of declining GDP growth as Ind-Ra expects it to come in at 5.7 per cent," the Fitch Group firm said in its report.

A Goldman Sachs report a few days back said that the current slowdown has lasted for 18 months as of June, 2019, making it the longest episode since 2006. It further said that policymakers have acted to mitigate the current slowdown but policy responses seem less aggressive compared with earlier episodes, with fiscal restraint so far.

The government had on August 23 announced a slew of measures to boost economy and lift investor sentiment. Among the measures steps included roll-back of enhanced surcharge on foreign portfolio investment (FPIs) and upfront transfer of Rs 70,000 crore for recapitalisation of public sector banks to give them firepower for lending.

Ind-Ra Principal Economist Sunil Kumar Sinha believes these measures would support growth only in the medium term. He, however, expects GDP growth to recover to 7.4 per cent in the second half the current fiscal mainly on account of the base effect.

Most lead indicators such as car sales, core sector data, jobs and services growth suggest Indian economy is in the grip of a slowdown. It is increasingly becoming a challenging task for the government to put the economy in high growth orbit to realise its potential of 8 per cent annual growth on sustained basis.