India’s economy grows slowest in five quarters

MUMBAI: India’s economy grew a lower-than-expected 6.6 per cent in the October-December period, the lowest in five quarters, dragged by lower farm and manufacturing growth, government data showed on Thursday.

A Reuters poll of economists had forecast a growth of 6.9 per cent for the December quarter, compared with a downwardly revised 7.0 per cent rise in July-September.

The government also revised its 2018-19 GDP growth estimate to 7 per cent from 7.2 per cent.

Aurodeep Nandi, India Economist, Nomura, Mumbai said: “The GDP growth number essentially shows the cyclical slowdown entrenching itself. Going ahead we do expect further moderation on tighter financial conditions, weaker global demand and political uncertainty. Therefore, despite budget and policy interest rates easing, there are enough growth headwinds to overpower the policy tailwinds. With low food prices keeping RBI’s headline inflation projection for end-2019 below 4 per cent, the dullness of growth prospects serves as a recipe for a 25 basis point rate cut by in April.”

“Real GDP growth in the December quarter at 6.6 per cent is broadly in line with our expectations. Considering the CSO now expects full-year FY19 advance GDP growth estimate at 7 per cent, we expect growth in the March quarter at 6.1-6.4 per cent. Our UBS India Financial Condition Index indicates that there is some easing in the index from January 2019 onwards and if that trend sustains, we expect growth to start recovering from the June 2019 quarter onwards. The easing monetary (we now expect MPC to cut rates by cumulative 75-100bps in this cycle) and fiscal policy will provide some leeway to boost consumption and hence, overall growth over the coming quarters,” said Tanvee Gupta Jain, Chief India Economist, UBS Securities India, Mumbai.

Anita Gandhi, Whole Time Director, Arihant Capital Markets, Mumbai said: “For the market perspective, this number is disappointing.

Global growth is also slowing down.” “Employment generation is very important from the perspective of GDP growth. As per the latest data, India has seen improvement on that front.” “GDP is like the government’s report card. People will see it on a year-to-year basis, not just a quarter and this could have an impact given elections are near.”

“I had expected the overall GDP growth for FY19 to get revised downwards, as the farm sector had suffered due to extremely uneven rainfall, depleted water reservoir levels in key agrarian states and their impact on sowing of foodgrains. Manufacturing and small services too had slowed due to a crisis of confidence for the NBFC sector during September to December 2018. The GDP data has correctly captured these events that had impacted growth. In retrospect, the RBI’s policy actions on February 7 get strongly vindicated,” said Rupa Rege Nitsure, Group Chief Economist, L & T Finance Holdings, Mumbai.