It's just as we suspected.
India's economic heartbeat, aka GDP, fell to a seven-year low of 5 per cent for the quarter ended June 2019. If March quarter's 5.8 per cent growth pushed India behind China, Friday's data dispatch puts Asia's third-largest economy even behind the Philippines and Indonesia in terms of real growth rate.
June quarter's pedestrian economic expansion is several shades lower than the healthy 8 per cent recorded just a year before in June 2018. The previous low of sub-5 per cent was seen last in June 2013 when the economy grew at an anaemic 4.9 per cent.
What led to the slowdown?
Worryingly, six out of the eight broad indicators used in GDP measurement sulked in June quarter over last year with manufacturing witnessing the lowest growth at 0.6 per cent, just a few notches away from slipping into the negative territory. Last year, the manufacturing sector had put up a stellar show raking in 12.1 per cent growth.
Next in line were the usual suspects of agriculture and mining sectors, which grew at a dismal 2 and 2.7 per cent respectively.
On the other hand, electricity and utility services and public administration (government revenue expenditure) were the guiding lights for the economy, having bettered their growth rates over the previous year.
In all, GDP in June quarter stood at Rs 35.85 lakh crore as against Rs 34.14 lakh crore a year before, registering a growth of 5 per cent.
Gross value added - excluding subsidies and taxes - and considered as a far more reliable measure of national output stood at Rs 33.48 lakh crore compared to Rs 31.90 lakh crore, registering a growth of 4.9 per cent.
"While the slowdown is broad-based, the deterioration is most marked for private consumption and manufacturing. We feel that India would do better in the second half of FY20. Yet, at least 7.5 per cent growth would be needed in the last two quarters to reach even 6.5 per cent growth for the whole year, which looks like an uphill task. The RBI Annual Report argued that the current slowdown in India is cyclical. We, however, feel that there are structural components also. The government and the RBI have recently initiated numerous measures to improve the growth situation. But we think more significant measures will be needed given the enormity of the task," said Sujan Hajra, Chief Economist and Executive Director, Anand Rathi.
"Government revenue expenditure net of interest payments grew by 8.7 per cent during June 2019 compared to 6 per cent a year before. But taxes on products threw a wrench in the wheel growing by 5.3 per cent in June as against 10.2 per cent last year," the Central Statistics Office said in a statement.
Private final consumption expenditure saw a flat growth and rate stood at 55.1 per cent as against 56.1 per cent, while government final consumption expenditure grew fairly robust at Rs 4.22 lakh crore from Rs 3.88 lakh crore, with its rates remaining flat at 11.8 per cent. Gross fixed capital formation stood at Rs 11.66 lakh crore and accounted for 32.5 per cent.
The RBI marginally lowered GDP growth estimates for FY20 to 6.9 per cent from 7 per cent projected earlier in its June policy statement.
"Real GDP growth for 2019-20 is revised downwards from 7 per cent in the June policy to 6.9 per cent - in the range of 5.8-6.6 per cent for first half of 2019-20 and 7.3-7.5 per cent for the second half - with risks somewhat tilted to the downside," it noted.