Bikky Khosla | 03 Dec, 2019
Gross Domestic Product (GDP) growth
rate fell to the slowest in around six years in the second quarter of 2019-20. According
to data released by the Ministry of Statistics and Program Implementation, the
second quarter GDP fell to 4.5 percent as against 7 percent
during corresponding period of last fiscal (2018-19). After
fourth quarter (January-March) of fiscal year 2012-13, this is the lowest
growth rate. Also, this is for the sixth quarter that GDP growth declined in a
According to economy watchers, the trend
of subdued consumption has been the major dragging factor. The latest figures
show that all major sectors, including automobile, capital goods, banks,
consumer durables, FMCG and real estate, have been heavily battered. The output
of manufacturing, mining and electricity generation, among others have also plunged.
On the production side, weakness in the industrial sector is quite evident
while on the expenditure side, private consumption slumped to 3.1 percent.
The government, however, does not seem
to be panicking. A day after release of the GDP data, the Prime Minister said that
the first six months of the NDA government since its re-election have been "phenomenal for the rise of a new India". The Finance Minister, in a similar
tone, said that several significant steps in structural reforms have been taken
in the past few months. A ruling party MP even went to the extent of saying
that GDP numbers shouldn't be considered the "Bible, Ramayana or the
Mahabharata" to judge the economy.
No doubt, the Indian economy is not facing
an imminent collapse, but the six-year low GDP figures are not at all
comforting, and they at least suggest that a sharp bend is not around the
corner. Also, we can expect another 25 bps rate cut by the RBI in its December
5 policy meeting. Additionally, the latest growth figures have raised
expectation of sector-specific measures by the government. Particularly, there
is a widely accepted view that the Centre must fix the financial sector to reverse
the economic decline.
I invite your opinions.