July-Sep GDP growth may fall below 5%

‘We expect a pick-up in the second half of the current fiscal. But before that, data is likely to show a further slowdown. The second quarter print is likely to be worse than the first quarter,’ said a senior official.

Illustration: Uttam Ghosh/Rediff.com.

The government estimates internally that the July-September quarter gross domestic product (GDP) growth will be even lower than the April-June quarter, based on the available indicators and data.

This means for the first time since the January-March quarter of 2012-13, GDP growth is expected to slip below the 5 per cent-mark. For that quarter, real GDP growth was 4.3 per cent.

Real GDP growth for the April-June quarter was 5 per cent, the lowest since 2013. The nominal GDP growth was 8 per cent, the lowest since the third quarter of 2002-03.

“We expect a pick-up in the second half of the current fiscal. But before that, data is likely to show a further slowdown. The second quarter print is likely to be worse than the first quarter,” said a senior official.

This is in line with most revised estimates by government bodies, research firms and ratings agencies. Most of them expect a slight pick-up in the October 2019-March 2020 period -- the second half of fiscal year, primarily due to a low base effect.

In an interview with Business Standard, Chief Economic Advisor Krishnamurthy Subramanian had cut his forecast for 2019-20 to between 6-6.5 per cent from 7 per cent earlier.

The Reserve Bank of India, on the other hand, has since then successively lowered its forecast to 7.2 per cent in April, 7 per cent in June, 6.9 per cent in August and now 6.1 per cent in October.

The International Monetary Fund (IMF) originally pegged India’s economic growth rate at 7.2 per cent for FY20 in its April outlook. However, a few months later in July, it cut it to 7 per cent. Now, in its October World Economic Outlook, the Fund scaled down the growth rate to 6.1 per cent

Then, the World Bank revised down India’s growth rate sharpest to 6 per cent from its earlier estimates of 7.5 per cent.  The Organisation for Economic Co-operation and Development scaled it down to the lowest growth rate of 5.9 per cent from its earlier forecast of 7.2 per cent. Other agencies such as India Ratings, Moody’s Investors Service, and CRISIL also cut India’s growth rate sharply. 

The latest data, which portends a bad second quarter is the core sector data, released on Thursday. The output of the core sector fell a record 5.2 per cent in September, with production by seven of the eight industries declining.

Other indicators aren’t encouraging as well. Index of Industrial Production data showed a growth of 4.6 per cent for July. However, the same data showed that IIP contracted 1.1 per cent in August, the sharpest fall in 81 months.