GDP growth slips to 5%

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GDP growth slips to 5%
Just around an hour after the Central Statistics Office (CSO) put out growth numbers for the first quarter (Q1) of 2019-20, the chairman of the Prime Minister’s Economic Advisory Council (PM-EAC) issued an appeal: Avoid hand-wringing and spreading negativity. This may be a valid appeal, but it is a difficult ask when, at 5 percent, this Q1 growth is the lowest in twenty-five quarters and growth since Q4 of 2017-18 (8.1 percent) has been dipping lower every quarter.

The investment rate slipped from 28.8 percent in Q1 of 2018-19 to 27.9 percent in Q1 of the current fiscal, which is also lower than the 30.2 percent logged in Q4 of the previous fiscal. The last capacity utilization numbers from the Reserve Bank of India (RBI) are for Q4 of 2018-19 and these show an increase of just 0.2 percentage points (from 75.9 to 76.1).

The PMEAC has said constructive criticism and suggestions are welcome. There are many out there and it should persuade the government to act on these. The RBI annual report said that though the slowdown was cyclical and not structural, a number of structural reforms are needed. The PMEAC and NITI Aayog need to keep prodding the government to undertake these.

Takeaway- 
  • Few sectors have remained unaffected, though it was manufacturing which posted the worst performance, with growth stagnant at 0.6% percent.
  • Private consumption growth, at 3.1% in Q1 of this fiscal was an 18-quarter low.

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