Gross Domestic Product growth falls to 4.5% in Q2 of 2019-20

The Gross Domestic Product growth fell to 4.5 per cent in the second quarter of the year 2019-20.

HIGHLIGHTS

• India's GDP in Q2 2019-20 down to 4.5% from 5% in Q1
• GDP growth in Q2 of 2018-19 was 7.1%
• GDP numbers have been declining for 7 quarters now

The Gross Domestic Product continued its downward spiral for the seventh consecutive quarter, falling to 4.5 per cent in the second quarter (July-September) of the year 2019-20. This is a fall of 0.5 per cent points compared to the last quarter. Compared to the second quarter of the year 2018-19, it is a fall of 2.6 per cent points. In the second quarter of the previous year, the GDP growth stood at 7.1 per cent.

The GDP growth seen in the last quarter was slowest in more than six years. The previous low was recorded at 4.3 per cent in the final quarter (January-March) of 2012-13.

The GDP numbers were released along with the data for the eight core infrastructure industries, which showed output delcining by 5.8 per cent in October. As many as six of eight core industries saw a contraction in output in October. Coal was the worst hit, declining steeply by 17.6 per cent.

India's economic growth has taken a hit due to a number of factors - including slowdown in private consumption, investment and export - but the key indicator is lack of credit (money to produce goods) growth and demand in the market. The Narendra Modi government has taken a slew of reforms in recent months to boost credit in the market - focusing on offering incentives to banks to increase lending - but to little avail.

These measures include slashing of the lending rate (the rate that is linked to banks' interest rates) by the Reserve Bank of India five times this year, withdrawal of 'super-rich surcharge' imposed on foreign investors, exemption of start-ups from 'angel tax', an infusion of Rs 70,000 crore in public sector banks and a significant cut in the corporate tax rate.

However, analysts and experts were of the view that the government did not do enough to address the issue of slowdown in demand. They argued that declining demand is among the prime reasons for economic slowdown.

The concern expressed by economists is in sync with what Union Finance Minister Nirmala Sitharaman said earlier this month. She had ruled out revival of economy any time soon while asserting that the government was doing everything possible.

"It is too presumptive of me to say it [economic slowdown] has bottomed out," Sitharaman had said speaking to reporters earlier this month, fueling speculation that India's economy is yet to see the worst of the ongoing downturn.

Wondering what made her say that? Read IndiaToday.in's analysis of about the warning signals that suggest gloomier days ahead for the Indian economy.