Q1: GDP growth slumps to over 6-year low

India's GDP growth slowed to an over six-year low of 5% in the April-June quarter, dragged down by manufacturing sector expansion of just 0.6%, sluggish financial services, farm and construction sectors and a slowdown in consumption.

GDP growth in April-June, the first quarter of the fiscal year, had slowed to 5%, lower than the 5.8% in the previous quarter and below the 8% in the first quarter of the previous year. The June quarter growth was the slowest since the March quarter of 2012-13, when the UPA was in office, making this the worst quarterly performance under the Modi government’s watch. The latest number is a 25-quarter low.

The data came on a day when finance minister Nirmala Sitharaman unveiled a mega bank merger plan, following up on the measures announced last week to give a boost to the economy.

Several key sectors such as automobiles have faced the brunt of the slowdown leading to job losses and a cutback on production by companies. The RBI has cut interest rates for four consecutive times to counter the slowdown in the economy and there are hopes that growth may pick up in the coming quarters.

The latest data showed manufacturing sector growth slowed to a two-year low of 0.6%, sharply below the 12.1% growth in the first quarter of the last fiscal year, which indicates muted demand and slowdown faced by the corporate sector.

The farm sector grew by 2% in the June quarter, below the 5.1% recorded in the previous year’s first quarter and economists attributed it to floods in some parts of the country, the high base of last year and impact of uneven rainfall on the segment.

Some economists advocated more fiscal measures to boost growth and tame the slowdown as interest rate cut may not be enough to revive growth.

Several economists pared their expectations for GDP growth for the current fiscal year which will end in March 2020, and estimated the economy to grow at 6.7%-6.8%, although they expect a growth pick up on the back of the government’s reform measures.

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