Economy

India's GDP Growth Drops to 5% for First Quarter of FY20, Slowest in Six Years

The numbers released on Friday are below general market expectations, as most estimates had predicted the growth would be between 5.7-5.8%.

New Delhi: India’s economy expanded at its slowest pace in over five years for the first quarter of fiscal year (FY) 2019-2020, according to official government data released on Friday evening.

The gross domestic product (GDP) growth rose just 5% for the quarter ended June 2019, in a development that reinforces concerns over a slowing down of the Indian economy.

Lower growth, data shows, is primarily due to a sharp deceleration in the manufacturing sector and sluggish agriculture output. In addition to this, ‘consumption growth’ was also weak – private final consumption expenditure growth fell to 3.1% in Q1 FY20 as compared to 7.2% in the previous quarter.

The numbers that were released on Friday are below general market expectations: most estimates had predicted that Q1 growth would be between 5.7-5.8%

Growth is down compared to the 5.8% recorded in Q4 FY19 and the 8% that the Indian economy hit one year ago in Q1 FY19.

Financial Quarter

GDP Growth 

Q1 2018-19 (April-June)

8.0%

Q2 2018-19 (July-Sep)

7.0%

Q3 2018-19 (Oct-Dec)

6.6%

Q4 2018-19 (Jan-March)

5.8%

Q1 2019-2020 (April – June)

5.0%

The last time that quarterly data was this low was in the Q1 of FY13, when GDP growth was recorded at 4.9%.

“Q1 FY20 GDP growth at 5.0% was 25 quarter low. The growth slowdown was led by private final consumption expenditure, which grew 3.1% only (18 quarter low). Investment demand also remained lackluster and fixed capital formation grew 4.0% (4QFY19: 3.6%). Only government expenditure provided support to growth and increased 8.8%,” said Devendra Pant, chief economist, India Ratings and Research (Fitch Group), in a statement.

“While general elections in April-May 2019 had some impact on investment growth, collapse of private consumption demand from 10.6% in 4QFY18 to 3.1% in 1QFY20 is real cause of concerns. Both structural and cyclical issues are plaguing Indian economy and in order to bring economy back to a respectable growth path both short-term and long term measures are required,” the statement added.

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