India remains fastest growing despite GDP recording five-quarter low

 In signs of the Indian economy losing steam ahead of the general elections, GDP growth slowed to a five-quarter low of 6.6% in October-December on the back of lower farm and manufacturing growth and weaker consumer demand, government data showed Thursday.

Also, economic growth estimate for the current fiscal year ending March 31 has been revised downwards to 7% from the earlier estimate of 7.2%. This is the lowest growth in the last five years.However, the third quarter growth rate, which was lower than the revised estimate of 7% in the previous quarter and 8% in April-June, was faster than China's 6.4% growth for the three months to December 2018. India thus retains its tag of the world's fastest-growing major economy.

Data from the Central Statistics Office (CSO) showed slower consumer spending at 8.4% as compared to 9.9% in the previous quarter. Farm sector growth slowed to 2.7% from 4.2% in Q2 and 4.6% in Q1.The Reserve Bank of India (RBI) had earlier this month cut the key interest rate by 25 basis points and changed its policy stance to "neutral" from "calibrated tightening", saying the shift provides flexibility and room to address challenges to the sustained growth of the Indian economy over the coming months.

Parallelly, eight core infrastructure industries' growth in January declined to a 19-month low of 1.8% (December 2018: 2.7%, January 2018: 6.2%) on contraction in refinery products and electricity. Electricity sector, which last witnessed a contraction in February 2013, posted a growth of (-) 0.4% in January -- the lowest in the last 71 months.

Devendra Kumar Pant, chief economist at India Ratings, said size of the economy (nominal GDP) in FY19 is now estimated at Rs 190.54 lakh crore compared to Rs 188.41 lakh crore, which "will help government to achieve fiscal deficit/GDP target for FY19 even though the fiscal deficit till January 2019 is 121.5% of FY19 (revised estimate)." FY19 GDP growth at 7% "indicates that the economy is losing steam," he said, adding the GDP growth in Q4 has to be 6.5% to attain overall 7% growth in FY19. "This on the face of it looks plausible; however, unless exports in Q4 grow 14%, attaining 7% growth will be difficult."

According to CSO, while agriculture is estimated to grow at 2.7%, manufacturing growth is expected to accelerate to 8.1% in 2018-19. However, trade, hotel and transportation sector growth is expected to decelerate to 6.8% during the year.

The Gross Domestic Product (GDP) at constant prices (2011-12) had grown at 7.7% in the October-December quarter of the previous financial year. The growth rate was revised upwardly from 7%.
"GDP at Constant Prices in Q3 of 2018-19 is estimated at Rs 35 lakh crore, as against Rs 32.85 lakh crore in Q3 of 2017-18, showing a growth rate of 6.6%," the CSO said.

The CSO also revised GDP growth figures for April-June and July-September quarters of this fiscal to 8% and 7% from 8.2% and 7.1%.The GDP growth rates for April-June and July-September of last fiscal were also revised to 6% and 6.8% from 5.6% and 6.3%, respectively."Declining trend in core sector growth from October 2018 suggests continued weakness in industrial activities and a weak second half economic growth. Expect a low industrial growth in the month of January 2019," Pant added.

During the third quarter of this fiscal, the gross value added (GVA) of the farm sector grew at 2.7% compared to 4.6% a year ago.Similarly, mining and quarrying growth slipped to 1.3% from 4.5%. The manufacturing sector also grew at a lower rate of 6.7% in the third quarter compared to 8.6% earlier.In its second advance estimates for this fiscal, the CSO said farm sector GVA will grow at 2.7% in 2018-19 compared to 5% a year ago.

Mining and quarrying growth for the full fiscal has been estimated at 1.2% as against 5.1% in 2017-18.However, it estimated that manufacturing growth would be higher at 8.1% compared to 5.9% in the previous financial year.Meanwhile, the per capita income in real terms (at 2011-12 prices) during 2018-19 is likely to grow to Rs 92,718 as compared to Rs 87,623 for 2017-18. The growth rate in per capita income is estimated at 5.8 percent during 2018-19, as against 5.7% in the previous year.

The Gross Fixed Capital Formation (GFCF), an indicator of investment, at current prices is estimated at Rs 55.02 lakh crore in 2018-19 as against Rs 48.97 lakh crore in 2017-18.At constant prices (2011-12), the GFCF is estimated at Rs 45.50 lakh crore in 2018-19 as against Rs 41.37 lakh crore in 2017-18.In terms of GDP, the rates of GFCF at current and constant prices during 2018-19 are estimated at 28.9% and 32.3%, as against 28.6% and 31.4% in 2017-18. The GFCF is expected to register a growth of 12.4% at current prices and 10% at constant prices during 2018-19.