India's GDP growth drops to 3.1% in March quarter

Daniel Fowler
May 31, 2020

"Due to a 2.8 per cent contraction in investment and 3.6 per cent fall in exports, real GDP growth has fallen to 4.2 per cent in 2019-20, which is the lowest since 2008-09 when it was 3.1 per cent".

Food inflation stood at 6.56 per cent in April 2020 against 6.67 per cent of the previous month (March 2020) and 4.92 per cent during the corresponding month (April 2019) a year ago, it said.

The full impact of the lockdown on manufacturing and services will become more apparent in the June quarter, with Goldman Sachs predicting a 45% contraction from a year ago.

Unlike some advanced economies, India's stimulus package has largely focused on subsidized credit to small businesses and farmers, while direct fiscal stimulus was limited to around 1% of the GDP, economists said. However, slowing down of business activities across the world in January-March impacted the Indian economy. "It is a telling commentary on the economic management of the BJP government", he tweeted. Among the key sectors of the economy, the agricultural sector has exhibited and improved growth of 4.0%, while the mining and quarrying sector has returned to positive growth of 3.1% in FY2020.

The arduous lockdown has already been extended thrice with some relaxations beginning this month.

Since the revised nominal size of the economy for 2019-20 has been scaled down marginally from the earlier estimate of Rs 204 trillion to Rs 203 trillion, the fiscal deficit widened to 4.6% GDP - the biggest slippage seen in recent times.

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The Reserve Bank of India (RBI) had earlier pegged the GDP growth for 2019-20 at 5% as projected by the NSO in its first and second advance estimates released in January and February. Similarly, the first and second quarter growth figures have been revised downwards to 5.2 per cent and 4.4 percent from 5.6 per cent and 5.1 per cent, respectively.

Meanwhile, the CSO revised downwards growth in the previous October-December quarter of 2019-20 to 4.1% from 4.7%.

The agriculture sector saw a growth of 4 per cent during the year - a sharp surge over the 2.4 per cent growth in 2018-19.

There was a marginal improvement in the GDP growth rate in Q3 of FY20 at 4.7%, after it declined for five consecutive quarters.

The growth rate in FY20 is slower than the 5 per cent the government expected before the virus outbreak.

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