Deepening slowdown: on the Indian economy
Can the RBI’s reduction in borrowing costs help check the demand slowdown?
India’s economy is inarguably slowing, and the latest estimates from the Central Statistics Office disconcertingly point to a deepening slowdown. GDP growth is projected to have eased to 6.6% in the October-December period. With the CSO now forecasting the full-year expansion at 7%, fiscal fourth-quarter growth is implicitly pegged at an even slower 6.5%. At that level, growth would have slowed to a seven-quarter low, giving the incumbent NDA government its slowest pace of annual growth. The data clearly reflect the pain points in the real economy that have been evident for some time now. For one, the farm sector continues to remain in trouble with GVA (gross value added) growth in agriculture, forestry and fishing having slowed sharply to 2.7% in the last quarter, from a 4.2% pace in July-September and 4.6% a year earlier. With rabi sowing showing a shortfall across most crops after a deficient north-east monsoon, and the abiding structural issues that have pushed a multitude of farmers into acute distress nowhere near resolution, it is hard to foresee an early revival in this crucial primary sector. This, in turn, continues to dog demand in the hinterland for manufactured products, from two-wheelers to tractors, and is evident in the consumption spending data. Growth in private final consumption expenditure eased appreciably to 8.4%, from the second quarter’s pace of 9.8%.
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