India’s Economy Grows At 4.5% In The July-September Quarter Slowest Since March 2013

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New Delhi: India’s economy grew 4.5% in the July-September quarter (the second quarter of fiscal 2019-20), the slowest pace of expansion since March 2013, hurt by inadequate revival in consumption and stagnant investment, with only strong government spending preventing an even steeper slowdown.

The latest numbers mark the longest continuous deceleration in gross domestic product (GDP) growth, which has been slowing for six straight quarters. Top officials of the finance ministry said the worst was over and the economy will grow faster in the last two quarters of the current financial year, although high-frequency indicators and anecdotal accounts are yet to reflect this.

The index of eight core sector industries contracted by 5.8% on a year-on-year basis in October. This is the second consecutive monthly contraction after September, when the index shrank 5.1%. Crop destruction due to excess rains in the past month might adversely affect agricultural growth in the third quarter.

Friday’s numbers put India’s GDP growth in the first half of the current fiscal year at 4.8%, the lowest since the new GDP series was launched in 2012-13.

Addressing reporters immediately after announcement of the GDP numbers, Department of Economic Affairs (DEA) secretary Atanu Chakraborty and chief economic adviser (CEA) KV Subramanian said the country’s economic fundamentals were strong, and that consumption and investment were expected to pick up in the subsequent quarters.

“The economy has bottomed out,” Chakraborty said, adding that the fundamentals of the Indian economy were very strong, as reflected in factors such as “low inflation, macro-economic stability, low fiscal deficit and good foreign reserves”.

Rumki Majumdar, economist, Deloitte India, an audit firm, agreed: “Compared to the past four slowdown cycles, several economic fundamentals are in much better shape today. Inflation is low and is expected to remain so because of the excess capacity in the economy.”

Earlier this week, finance minister Nirmala Sitharaman indicated as much in Parliament. On Thursday, she put out a series of tweets highlighting her government’s record at keeping inflation under control, growing manufacturing faster, and maintaining the fiscal health of the economy. “Marcroeconomic fundamentals of India are strong under the Narendra Modi led NDA government,” she tweeted.

Sitharaman said in Parliament earlier this week that the government had taken 32 measures to address issues faced by the various sectors. These include a cut in corporate taxes, a real estate fund aimed at reviving incomplete projects, the merger of banks, and a large-scale disinvestment exercise.

The low GDP growth numbers provoked an immediate attack by the opposition. “The economy has been pushed into a coma by the BJP, the Prime Minister, and the Finance Minister,” Congress spokesperson Randeep Singh Surjewala told reporters.

“Lowest GDP growth in 26 quarters! No answers from FM....”, All India Trinamool Congress MP Derek O’Brien said.

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