The Bad News Today is Our Economy Has Slowed Down

The real GDP growth rate is seen at 7 per cent while the implied real GDP growth at 6.5 percent is lower in Q4 of the FY2018-19
New Delhi: Well that's definitely not a piece of great news for the incumbents out in the field to fight the election battle 2019. But the fact is, India's economy has slowed down in the Q4 of the FY 2018-19. The department of economic affairs (DEA) that works under the finance ministry, has said in its monthly economic report for March 2019 that declining growth of private consumption and slow growth in fixed investment and exports has slightly slowed down Indian economy in the final quarter.

"India's economy appears to have slowed down slightly in 2018-19. The proximate factors responsible for this slowdown include declining growth of private consumption, tepid increase in fixed investment, and muted exports," the Monthly Economic Report released by the DEA said.

"India's economy appears to have slowed down slightly in 2018-19. The proximate factors responsible for this slowdown include declining growth of private consumption, tepid increase in fixed investment, and muted exports,"-DEA Report

The implied real GDP growth is lower in Q4 of the FY2018-19, at 6.5 per cent, while for entire FY 2018-19, the real GDP growth rate is seen at 7 per cent, it said, adding that the slowing imports hint at a slowdown in growth. "This slowdown is in line with the forecast made earlier by the Central Statistical Office, we had said in August itself that India will have a sub-7 per cent GDP growth said Prof. N R Bhanumurthy of the National Institute of Public Finance and Policy.

"We believe that not only decline in the external demand, but the deterioration in the quality of public expenditure and the pressure on the banking sector by way of NPAs contributed to this." Thursday's report said that on the supply side, the main challenge is to reverse the slowdown in the growth of the agriculture sector and sustain the growth in the industry.

A decline in demand, consumption and concerns on investment

"Growth in Gross Value added (GVA) in agriculture has been slowing since Q1 of 2018-19, and may continue to fall in Q4 as well; moderation in food deflation may soften this decline towards the end of the year," the report pointed out.

"Though easing of monetary policy has the potential to support growth, the recent cuts in the repo rate are yet to transmit to a weighted average lending rate of banks; thus the effects of the easing on investment activity are yet to manifest,"

Apart from the decline in demand and consumption, the report has also expressed concerns on the investment side. "Though easing of monetary policy has the potential to support growth, the recent cuts in the repo rate are yet to transmit to a weighted average lending rate of banks; thus the effects of the easing on investment activity are yet to manifest," the report said. The real reflective exchange rate has appreciated in the fourth quarter and it could pose a challenge on the export revival front, the report said.

Manufacturing hits an 8 month low!

Foreign Exchange Reserves in terms of months of import cover have fallen from 14 months in April 2016 to nine months in October 2018. The Nikkei Manufacturing Purchasing Managers' Index released on Thursday said India's manufacturing sector's performance hit an eight-month low in April on account of moderated business growth, elections, and a challenging economic environment.