Slowdown persists, economy grew 4.7% in Q3 2019-20 — the ‘lowest in 27 quarters’

Economic recovery remains elusive as sectors such as manufacturing and electricity contract. Full year GDP growth forecast at 5%.

Representational image | Dhiraj Singh | Bloomberg

New Delhi: The Indian economy grew at 4.7 per cent in the third quarter of fiscal year 2019-20, lower than the revised 5.1 per cent in the second quarter and 5.6 per cent in the first quarter, in an indication that the recovery of the economy remains elusive amid a sharp slowdown.

According to the National Statistical Office (NSO) data released Friday, the Indian economy is projected to grow at 5 per cent for the full year, the same as its previous projection made last month. Economists say India’s GDP is at a 27-quarter low.

With the impact of the coronavirus outbreak now being felt across certain sectors, like automobiles and pharmaceuticals, the full year growth numbers may see a downward revision on 29 May when the fourth quarter GDP growth numbers and the full year numbers are released.

The Indian economy grew at 6.1 per cent in 2018-19.

Slowdown in Indian economy

A median forecast of a Bloomberg poll of 42 economists had pegged India’s third quarter GDP growth at 4.7 per cent.

A sharp slowdown in consumption and investment has pushed growth to an 11-year low — one of the biggest challenges for the Narendra Modi government in the first year of its second term. The Reserve Bank of India (RBI) has slashed key policy rates by 135 basis points since February last year and announced steps to encourage bank lending for retail and MSME loans to revive consumption in the economy.

However, data released by the NSO Friday showed that while gross value added in agriculture grew by 3.5 per cent, manufacturing and electricity contracted by -0.2 per cent and -0.7 per cent respectively. The gross value added in construction rose 0.3 per cent in the October-December quarter.

Gross fixed capital formation, a key indicator of investment demand in the economy, contracted by 5 per cent.

Private final consumption expenditure, a measure that reflects consumption spending of households, grew at 5.9 per cent. Government final consumption expenditure, a measure that reflects spending by the government, grew 12per cent in the quarter.