India has lost its coveted title of the world's fastest growing economy to China, as low agriculture and mining output along with subdued consumer demand, slowed the country's economic growth rate to 5.8 per cent during the fourth quarter of 2018-19, official data showed on Friday.
China's economy had grown by over 6 per cent in the fourth quarter. However, on an annual basis, India's 6.8 per cent GDP growth is still over that of China.
On sequential term, India's economy had grown at 6.6 per cent in the third quarter ending December, where as on a year-on-year (YoY) basis, the GDP expanded by 8.1 per cent during the same quarter of the previous year.
"GDP (gross domestic product) at constant (2011-12) prices in Q4 of 2018-19 is estimated at Rs 37.20 lakh crore, as against Rs 35.15 lakh crore in Q4 of 2017-18, showing a growth rate of 5.8 per cent," according to the GDP estimates released by the the Central Statistics Office (CSO).
Similarly, the full fiscal 2018-19 was no better for the economy with the country recording a GDP growth of 6.8 per cent - the lowest in five years. In the fiscal 2017-18, the country had clocked a GDP growth rate of 7.2 per cent.
The gross value added (GVA) growth rate during 2018-19 on a YoY basis fell to 6.6 per cent, from 6.9 per cent during the previous fiscal.
"Real GVA, (GVA at basic constant) (2011-12) prices for the year 2018-19 is now estimated at Rs 129.07 lakh crore, showing a growth rate of 6.6 per cent over 'First Revised Estimates of GVA' for the year 2017-18 of Rs 121.04 lakh crore released on January 31, 2019," the CSO said.
The GVA includes taxes, but excludes subsidies.
As per the data, the economic activities which registered growth of over 7 per cent on a YoY basis in 2018-19 were 'public administration, defence and other services', 'construction', 'financial, real estate and professional services', 'electricity, gas, water supply and other utility services'.
"The growth in the 'agriculture, forestry and fishing', 'mining and quarrying', 'manufacturing' and 'trade, hotels, transport, communication and services related to broadcasting' is estimated to be 2.9 per cent, 1.3 per cent, 6.9 per cent and 6.9 per cent, respectively," the CSO said.
Sector-wise, GVA for 2018-19 from "agriculture, forestry and fishing" sector showed a growth of 2.9 per cent, from 5 per cent in 2017-18.
The GVA in 2018-19 from the manufacturing sector grew at 6.9 per cent, as compared to 5.9 per cent in the previous fiscal.
The mining and quarrying sector grew by 1.3 per cent against previous year's growth rate of 5.1 per cent.
On its part, the government said that slow growth was due to some temporary factors like NBFC sectors liquidity crunch.
"There was some slowdown in quarterly growth due to temporary factors. Problems in the NBFC sector reflected in the consumption slowdown," said Finance Secretary Subhash Chandra Garg in the briefing while adding the slowdown could continue in the first quarter of the current fiscal but the situation would improve in the second quarter (July-September).
"We see growth and consumption improving in the July-September (second quarter) period. Problems faced by NBFCs affected consumption in the finance sector, expect credit growth in the NBFC sector to pick up . Expect pick-up in capital and private investment", he said.
Ahead of the monetary policy review by RBI on June 6 , Garg said, "Inflation continues to be very low, expect MPC to take note of low inflation and growth slowdown".
"Maybe the first quarter of the current fiscal could also reflect a bit of slowdown, but from second quarter onwards we expect the the growth and consumption to come up very well and 2019-20 should be turning out to be better than A2018-19," Garg said.
"...Many of the things are getting sorted out now and interest rates have started declining substantially. The 10-year government paper was very close to 7% today. This is also feeding into NBFCs and other financing rates. New finances will be much cheaper. We expect credit growth in the NBFCs, consumer financing to pick up," he said.
According to Sunil Kumar Sinha, Director -- Public Finance and Principal Economist at India Ratings & Research: "Clearly the economy is slowing down and these numbers would be a cause of worry for the new central government."
"Given the budgeted fiscal deficit at 3.4% of GDP Ind-Ra believes the head room available to provide fiscal stimulus is limited. However, given the current inflation level which is well within the target range RBI may go for a rate cut in the forthcoming second bi-monthly monetary policy review."
GDP growth numbers:
FY19 GDP growth - 6.8 per cent
FY18 GDP growth - 7.2 per cent
Quarter wise GDP growth FY19
Q1 - 8.0 per cent
Q2 - 7.0 per cent
Q3 - 6.6 per cent
Q4 - 5.8 per cent
Quarter wise GDP growth FY18
Q1- 6.0 per cent
Q2 - 6.8 per cent
Q3 - 7.7 per cent
Q4 - 8.1 per cent
(Source: CSO)
