India's economic growth goes below 4.5% in September quarter
The country’s GDP lowers to 4.5% in the September quarter as per the official data released today (Nov. 29) showed. This figure in the sixth straight fall in quarterly GDP growth and also the first time in almost seven years that it has fallen below the psychologically important 5% mark.
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India’s annual economic growth has shown weakest pace since 2013, making an interest rate cut more likely when the central bank meets next week. However, the growth was 7% in the same quarter of 2018, and 5% in the previous quarter.
The gross domestic product data released on Friday showed consumer demand, private investment and exports all struggling, resulting in a year-on-year growth figure that was below the 4.7% forecast in a Reuters poll of economists.
Experts says, the current slowdown continuing for another year or two, underlining the case for urgent reforms. The market is skeptical about how effective monetary policy can be in boosting growth in the current scenario.
Prime Minister Narendra Modi’s government, given a second term by voters in May, has taken several steps, including cutting corporate tax in September and speeding up privatisation of state-run firms to boost investments and bolster growth.
Economists said the drop in growth could prompt the Reserve Bank of India to cut its repo rate by 25 basis points to 4.90% at its meeting from Dec. 3-5.
“A rate cut is definitely on the cards,” said Anagha Deodhar, an economist at ICICI Securities, Mumbai, adding that markets are skeptical about how effective monetary policy can be in boosting growth in the current scenario.
If the RBI does cut rates, it would the sixth consecutive policy meeting that it has done so. The repo rate has fallen 135 basis points so far this year but banks, saddled with about $140 billion in stressed assets, have not cut their lending rates much.
Firms show little appetite to invest due to sluggish domestic and global demand. Former prime minister Manmohan Singh said on Friday a gross domestic product growth rate of 4.5 per cent was unacceptable and worrisome, and urged his successor Narendra Modi to set aside 'his deep-rooted suspicion' of society and nurse India back to harmonious, mutually trustworthy society that can help the economy soar.
Delivering his valedictory address at a national conclave on economy, Singh said mutual trust is the bedrock of societal transactions fostering economic growth, but 'our social fabric of trust, confidence is now torn and ruptured'. The 'toxic combination of deep distrust, pervasive fear and a sense of hopelessness in our society' is stifling economic growth, he said.
"The GDP figures released earlier today point the growth rate of our economy in the second quarter of the current fiscal year is as low as 4.5 per cent. This is clearly unacceptable. And, the aspirations of our people want that this country should grow at 8 to 9 per cent per annum. Therefore, the sharp decline in growth rate from 5 per cent in first quarter to 4.5 per cent in second quarter is indeed worrisome," he said.
Singh, an eminent economist himself, said with an absolute majority in Lok Sabha and low global oil prices, the government has a once-in-a-generation economic opportunity to catapult India to the next phase of economic development and create new jobs for hundreds of millions of youth.
"I urge the prime minister to set aside his deep-rooted suspicion of our society and nurse us back to a harmonious, confident and mutually trustworthy society that can revive the animal spirits and help our economy soar," he said in a direct message to Narendra Modi.
Analysis of a $3 trillion market economy of 1.2 billion people. Economic participants respond to social and economic incentives. An expert says, 'Facing falling revenues, reducing Corporate tax and losing 1lac 40 thousand crore of revenue has ruined finances. Government has no fiscal room left as it stares at record fiscal deficit. It is the lowest GDP quarter in 6 years.
"According to CMIE methodology, Unemployment Rate is 7.6 per cent in November 2019. This is almost double the current global rate of 4.95% (as per ILO)," he said.
Ravi Shankar Prasad cities the success of films to deny the current economic recession. Shri Piyush Goyal claims that 'Maths didn't help 'Einstein' discover gravity' citing the pointlessness of the entire exercise of economic data crunching. Smt. Nirmala Sitharaman herself admits that there is all around slowdown but no recession.
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