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Last updated: 03 Dec, 2019  

Up.Down.Arrow.9.Thmb.jpg GDP growth slump

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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 row.

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.

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