SME Times News Bureau | 02 Sep, 2019
Gross Domestic Product (GDP) growth of the country grew
5 percent in the April-June
period of 2019-20 as compared to 5.8 percent in the last
quarter of the financial year and 7.8 percent in the same quarter of the
previous financial year. This marks the fourth successive quarter of decline in growth on the trot. The
latest figures came as a surprises to most economists. They, no doubt, fuel pessimism,
but this could be the bottom for the current slowdown.
A deeper look into the latest GDP figures reveals that agriculture
and allied activities fell sharply to 2 percent in the quarter compared to 5
percent in the same quarter of FY19. This, however, does not raise much concern
as the first quarter is associated more with residual Rabi harvest. Second, manufacturing
growth has been just 0.6 percent against 12.1 percent last year. These figures clearly
reflect the current slowdown in the auto and durable goods segments.
The slowdown is being felt also in the services sector.
Two key contributors to GDP -- trade, communication etc. and finance, real
estate etc. – registered a growth of 7.1 percent and 5.9 percent respectively. The
unsteady state of the NBFC segments can be blamed for this. This situation must
be reversed for a turnaround in these segments. However, it is a relief that services
sector activity in July returned to growth territory as indicated by the IHS
Markit India Services Business Activity Index.
While the April-June GDP figures are not at all encouraging, they
neither signal to an imminent doom, but the situation certainly calls
for some fiscal stimulus by the government. It is widely expected that the RBI
is likely to deliver another 40 bps in rate cuts this year, but it is equally
true that monetary policy alone cannot help the economy at this moment. So, the
government can work on a mix of both monetary and fiscal measures to address
the slowdown challenge.
I invite your opinions.