Business Today

Slowdown Blues: Indian economy slowed down in FY19 due to decline in private consumption, says govt

The major reasons for the slowing down of economy are declining growth of private consumption, tepid increase in fixed investment, and muted exports, says the Ministry of Finance's monthly economic report

twitter-logo BusinessToday.In   New Delhi     Last Updated: May 8, 2019  | 13:34 IST
Slowdown Blues: Indian economy slowed down in FY19 due to decline in private consumption, says govt
The ministry says the decline in private consumptions is reflected in the drop of the growth of two-wheeler sales.

India's economy slowed down slightly in the financial year 2018-19 due to declining growth of private consumption, tepid increase in fixed investment, and muted exports, the Ministry of Finance in its latest monthly report has said. The ministry says as the real GDP growth has seen a decline, private consumptions in FY19 Q4 has also declined, which is reflected in the drop of growth of two-wheeler sales. The Central Statistics Office (CSO) in its Q3 national account data too had revised a downward trend in the growth estimate for FY 19 to 7 per cent from 7.2 per cent, which is the lowest in the past five years.

The ministry report says the real challenge on the supply side is to reverse the slowdown in the growth of the agriculture sector and sustain the growth momentum in the industry. However, there are expectations that the current account deficit as a ratio to GDP will fall in Q4 of 2018-19, it says, adding it will limit the leakage of growth impulse from the economy. The report, however, claims India still remains the fastest growing major economy, which might grow even faster in the coming years.

Also read: Slowdown grips Indian economy; how do we emerge unscathed?

Headline inflation -- measured using the consumer and wholesale price indices -- declined in 2018-19 though inflation has firmed up slightly in recent months, the report said. On the fiscal front, the report claims the fiscal deficit has been gliding down to the FRBM target. "Monetary policy has attempted to provide a fillip to the growth impulse through cuts in repo rate and easing of bank liquidity. The room for this monetary easing has been created by low inflation in 2018-19, although it has started to inch up in the last few months of the year," added the report. The report says the CAD as per cent of GDP will see an improvement in Q4 of 2018-19 as a dip in imports has improved the merchandise trade deficit.

The expected firming up of government consumption expenditure in Q4 of 2018-19 is on course as growth in cumulative revenue expenditure of the central government has been higher in recent months. Citing a slowdown in non-food bank credit in FY 19 Q4, the report said the upward trend of fixed investment as a percentage of GDP might also pause for a while.

Also read: Slowdown Blues: India's unemployment rate in April rises to 7.6%, says CMIE

The monthly economic report also flags that slow growth in GVA in agriculture will continue to fall in Q4 after seeing a downward trend since Q1. "Moderation in food deflation may soften this decline towards the end of the year," it added.

The ministry report says the room for monetary easing by the RBI has been created by low inflation in 2018-19, although it has started to inch up in the last few months of the year. In a first back-to-back rate cut since the Monetary Policy Committee (MPC) was formed in 2016, the high-powered committee announced rate cuts in February and April by 0.25 per cent each to a one-year low of 6 per cent.

Also read:Slowdown Blues: India's unemployment rate in April rises to 7.6%, says CMIE

Also read:Slowdown Blues: Tata Power profit declines 6.5% to Rs 2,440.41 crore in FY19; Q4 net nosedives 92% to Rs 107.32 crore

Youtube
  • Print

  • COMMENT
BT-Story-Page-B.gif
A    A   A
close