AA Edit | Slowdown due to global effects
The Indian economy or the gross domestic product (GDP) has posted the lowest growth rate in nearly the last two years at 5.4 per cent in the quarter ending on September 30, pulled down by manufacturing, mining and quarrying, utilities and construction. The economic growth in the year-ago period was 8.1 per cent.
The growth slowed down in manufacturing to 2.2 per cent as compared to 14.3 per cent in Q2 FY24, mining and quarrying contracted by 0.1 per cent as against 11.1 per cent growth witnessed in the year-ago period, utilities grew 3.3 per cent vis-a-vis 10.5 per cent, and construction activity increased 7.7 per cent as against 13.6 per cent.
The slowdown in a primary sector like mining and the entire secondary sectors which encompasses industrial activity reflects a spillover effect of the global slowdown and dumping of excess production in other parts of the world. For example, domestic steel production remained stagnant while steel consumption has increased.
Another reason for the unexpected slowdown in the economy is the lower government consumption expenditure, whose growth declined to 4.4 per cent compared to 14 per cent in the year-ago quarter. The growth in net taxes also declined to 7.9 per cent as against 13.1 per cent in Q2 FY24, which would severely affect the ability of the government to bankroll its measures to support the economy. The government should, therefore, take steps to protect the local companies by invoking anti-dumping measures.
Government data on GDP also has a reason to cheer. Private final consumption expenditure, which has been the primary growth engine of the Indian economy till a few years ago, bounced back to six per cent compared to 2.6 per cent in the second quarter of the last fiscal. While it is good, one needs to check granular data to understand the source of this growth — the super-rich or debt — in the wake of muted wage growth for several years.