GDP growth at 6-year low: Economy grows at slowest pace since Jan-March 2013

New Delhi: It may be a shocker, but true. Beating all estimates predicted recently by leading rating agencies, banks and surveys, India’s economic growth, or gross domestic product (GDP), shrank further to an unexpected level, hitting an over six-year low of 4.5 per cent in the July-September quarter, down from five per cent in the previous quarter.

Confirming the fear of economic slowdown, the data also mirrored its justification of lower growth due to a number of factors, including weak private consumption, mute investment and exports, lack of credit growth and demand in the market. The current slowdown was visible across other sectors as well.

According to the data released by the National Statistics Office (NSO), the GDP was at the previous low of 4.3 per cent in the January-March period of 2012-13, while it grew seven per cent in the corresponding quarter of 2018-19.

For last over a month or so, both domestic and international rating agencies had cut the gross domestic product or GDP growth forecast, ranging between 6.2 and 4.7 per cent this financial year. Out of all agencies, Care rating agency estimated the highest of 6.2 per cent Q2 GDP growth, while Reuters Polls showed the lowest of 4.7 per cent a day before, but the government data settled an unexpected number at 4.5 per cent.

The Narendra Modi government recently took several measures to boost investments and bolster economic growth. These include withdrawal of the super-rich surcharge imposed on foreign investors, exemption of start-ups from “angel tax”, the infusion of Rs 70,000 crores in public sector banks, a significant cut in the corporate tax rate and slashing of the lending rate by the RBI five times this year.

However, the government is hopeful that the steps by the finance ministry will show positive results by next quarter onwards. “The fundamentals of the Indian economy remain strong. GDP growth is expected to pick up from the third quarter of FY 2019-20,” said Atanu Chakraborty of the department of economic affairs.

Economists hope that RBI may cut its repo rate for the sixth time in a row, by 25 basis points, to 4.90 per cent at its December 5 meeting. “Economic gro-wth is picking up in the second half of this fiscal, after the government took steps to support real est-ate and non-bank finance companies,” they claim

The data indicates that the economic growth started slowing gradually since demonetisation in November 2016, though the GDP in Q2FY17 was 8.87 per cent at that point. It has been also observed that all key sectors felt the heat and the GDP shrank gradually.