No let-up in GDP slowdown blues

After projections and forecasts by various agencies and experts, the real GDP numbers came out last week. And numbers were on expected lines. The growth of India's gross domestic product (GDP) hit a seven-year-low of 4.7 per cent during October-December 2019, the third quarter of the current financial year.

This represents good one percentage point decline from 5.6 per cent recorded in the corresponding quarter (October-December 2018) in the previous fiscal. But there is a tricky issue here.

The National Statistical Office (NSO), the official agency that measures GDP growth, announced earlier the second quarter (July-September 2019) GDP growth as 4.5 per cent, but now revised it upwards by 0.6 percentage points to 5.1 per cent.

Likewise, the growth in first quarter was also revised upwards by the same 0.6 percentage points to 5.6 per cent from 5 per cent announced earlier.

That means economy registered much higher growth in the first two quarters than that was officially declared in the past. Such steep revisions in GDP numbers would show NSO in poor light.

Further, thanks to these upward revisions, economic growth in the December quarter hit the lowest since fourth quarter of FY13 (January-March 2013) when it clocked 4.3 per cent upswing. Will NSO revise the third quarter GDP numbers as well? It can't be ruled out.

But the fact of the matter is that the country's economy is in a slow lane. That is an undeniable truth. The third quarter numbers also painted same picture. But there is a real cause for concern though.

As per the official data, the gross value added (GVA) growth in manufacturing contracted by 0.2 per cent in the third quarter. In the same period last fiscal, this expanded by a whopping 5.2 per cent.

The third-quarter reading is a clear indication that manufacturing sector is in doldrums. Electricity, gas and other utility services segment also contracted by 0.7 per cent against a staggering growth of 9.5 per cent growth in the same period a year ago.

However, farm sector witnessed some green shots. So were also mining and a few other segments. But overall economic growth still needs a push-up. Data showed that GDP growth in first nine months (April-December 2019) of this financial year grew at 5.1 per cent, down from 6.3 per cent in the same period a year ago.

Going by these numbers, the GDP growth in the current fiscal year, which ends in March this year, is likely to slip below five per cent. Fitch Solutions, a part of global rating agency Fitch, on Monday cut India's GDP growth forecast for FY20 to 4.9 per cent from 5.1 per cent projected earlier.

It blamed global coronavirus outbreak for cutting the projection. But Fitch's projection appears to be ambitious as coronavirus surfaced in India too and adverse impact of the novel virus on the Indian economy is likely to be more severe than estimated earlier.

Sadly, one of the three confirmed cases, was from Telangana. So, Telangana economy will also take a hit. It looks like there will be no let-up in slowdown blues for the economy for some more time. Time for more economic stimulus measures.