At 5.8 per cent, GDP hits 5-year low; job creation also dips

New Delhi: With a slowdown seen in key sectors like agriculture, industry and manufacturing in the past nine months that pushed up unemployment growth rate to some extent, India’s economic growth rate slipped to a five-year low of 5.8 per cent in January-March 2018-19. With this, India lost its fastest-growing large economy tag to China for the first time in two years as China’s economy posted 6.4 per cent growth in the March quarter.

Amid lower public spending and consumption demand, the government confirmed the sense of slowdown fears among aam aadmi on the day of its assuming office with some expectations of a wide-ranging policy impetus to turn around the country’s economy. The data came on the day when Nirmala Sitharaman took charge as the new finance minister in the second innings of the Narendra Modi government.

Reacting to the slowdown in Q4 GDP, economic affairs secretary S.C. Garg said that it was due to temporary factors like stress in non-banking financial company (NBFC) sector.

There was also some cause of concern for the government on joblessness. An National Sample Survey Organisation (NSSO) report said the unemployment rate in 2017-18 was 6.1 per cent, corroborating the pre-election leaked report that had claimed joblessness at a 45-year high.

Statistics secretary Pravin Srivastava told reporters, “It is a new design and a new matrix. It would be unfair to compare it with the past. This 45-year high is your interpretation. I don’t want to claim that it is 45-year low or high.”

According to data released by the Central Statistics Office on Friday, India’s gross domestic product or GDP growth slowed to 5.8 per cent in the January-March quarter of FY2018-19, the lowest in 17 quarters, as against 6.6 per cent in the December quarter.

Mr Garg hoped that the economy will be on an upward movement from second quarter. “I think first quarter of the current fiscal may also witness relatively slow growth, but economy to pick up second quarter onward,” said Mr Garg.

The CSO also revealed that GDP growth during 2018-19 fiscal stood at 6.8 per cent, lower than 7.2 per cent in the previous financial year.

“The growth in GDP was slowest since 2014-15. The previous low was 6.4 per cent in 2013-14,” the data said.

As far as economic slowdown is concerned, farm sector was the biggest drag on the growth front in FY19 with 2.9 per cent growth as against 5 per cent in FY18. “Gross fixed capital formation grew at 3.6 per cent in Q4 compared to 10.6 per cent in Q3 while private final consumption expenditure grew 7.2 per cent in Q4 compared to 8.4 per cent in Q3, reflecting a slowdown in corporate capex and weak consumption demand,” the data said.

Besides, the country’s fiscal deficit in full 2018-19 stood at 3.4 per cent of GDP, roughly in line with the Interim Budget estimate. Spending during the financial year was '23.1 lakh crore as against the revised target of '24.1 lakh crore.

The rate of growth in eight core infrastructure industries during April 2019 also came to 2.6 per cent as against 4.9 per cent in the previous month.

Keeping all the factors of slowdown in view, the unemployment rate for 2017-18 stood at 6.1 per cent, according to the labour survey data of the NSSO, which was released on Friday.

“The rate of urban unemployment stood at 7.8 per cent, while the rate for rural India was 5.3 per cent,” it said.

Experts, however, believe that the first challenge for the new government will be to arrest the slowdown and revive the economy through a combination of short and medium-to-long-term measures.

“The slowdown in economic growth is structural, which predates demonetisation and the goods and services tax (GST), rather than cyclical,” said an expert.

“The government may unveil some fiscal stimulus while keeping the fiscal deficit at controllable levels. Also, the Reserve Bank of India (RBI) has ample room to cut interest rates as inflation remains subdued,” he added.

The RBI’s monetary policy committee (MPC), which has cut policy rates by 50 basis points this year, is likely to cut the repo rate by a further 25 basis points at its June 4-6 meeting, bringing it to 5.75 per cent, the lowest since July 2010.