GDP growth slows to five-year low at 5.8% in January-March quarter; economy grew at 6.8% in FY19

India’s economic growth rate slowed to a five-year low of 5.8 percent in January-March 2018-19, due to poor performance in the agriculture and manufacturing sectors, official data released Friday said.

The Central Statistics Office (CSO) also revealed that GDP growth during 2018-19 fiscal stood at 6.8 percent, lower than 7.2 percent in the previous financial year.

The growth in the gross domestic product (GDP) was slowest since 2014-15. The previous low was 6.4 percent in 2013-14.

The fourth quarter growth was below China’s 6.4 percent. The slowdown will put pressure on Prime Minister Narendra Modi’s government and Reserve Bank of India (RBI) to provide a stimulus for the economy through fiscal measures and interest rate cuts.

Modi and his Bharatiya Janata Party have only just been re-elected to a second term with an increased majority.

A Reuters poll of economists had forecast a growth of 6.3 percent for the March quarter, compared with a 6.6 percent rise in the October-December period in 2018.

The statistics ministry downwardly revised economic growth for the fiscal year to 31 March, 2019 to 6.8 percent from 7.0 percent estimated earlier.

Arresting the slowdown and reviving the economy will be the first challenge for the new government, rating agency Ind-Ra said on 27 May.

“In Ind-Ra’s opinion, the new government will have to devise and execute both short-term and medium-to-long-term measures to arrest the slowdown.

“While cyclical challenges can be addressed through short-term measures, the need of the hour is to address the structural challenges plaguing the Indian economy,” it said.

It further said that although little can be done with regard to the global trade environment, certainly a more proactive policy intervention could be pursued to aggressively revive investment.

Private sector lender ICICI Bank in a research report had said the immediate priorities of the government should be focused on agricultural sector especially improving farm terms of trade, supporting systemic credit growth not just for the banking sector but for the Non-Banking Financial Company (NBFC) sector as well.

Growth rates to stay weak but a combination of strong government policy support and benign monetary policy environment should lead to a recovery in growth prospects towards the second half of this fiscal year, it said.

With agency inputs