What is behind the GDP growth falling to 5% -Radhika Merwin

-The Hindu Business Line

Apart from slowdown in manufacturing and construction, the steep decline in consumption is a big cause for worry

Even as the Centre’s big bank mergers detracted the attention briefly from the much-awaited GDP growth numbers for the April-June quarter, the sharp slowdown drew the market’s attention back to the immediate issue at hand. The Central Statics Office (CSO) revealing that the real GDP growth in Q1 of the current fiscal plunged to a six-year low of 5 per cent, is a big cause for worry.

The slowdown has been across most segments — mining, manufacturing, and construction — as indicated by the index of industrial production (IIP) data too. The sharp slowdown in financial, real estate and professional services and private final consumption on the expenditure side, is particularly worrisome.

Remember, the Economic Survey had painted a somewhat sanguine picture of the state of the economy, pegging the growth of the economy at 7 per cent (real GDP) for FY20, slightly higher than the 6.8 per cent in FY19. While this seemed optimistic even then, after the CSO’s Q1 GDP numbers, the RBI’s marked-down growth estimate of 6.9 per cent also seems way off the mark.

The real GDP growth this fiscal is likely to end at 6-6.2 per cent, stressing the need for urgent structural reforms by the government.

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The Hindu Business Line, 31 August, 2019, https://www.thehindubusinessline.com/economy/what-is-behind-the-gdp-growth-falling-to-5/article29307176.ece#

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