Signs of Slow Down Imminent


Growth rate for the second quarter( July, August and September) fell to 4.5% as signs of slowdown became ever more evident. This marks further detioration of the economy as growth rate for first quarter was a paltry 5%. Compared to a growth of 4.5 %  in the second quarter of  of the fiscal year 2018-19, growth rate for the first quarter of fiscal year 2018-19 was recorded at 7.1 %. During the Q2 of 2019-20, Financial Services grew at 5.8% and government expenditure rose by 11.6% , Q2 industrial output contracted by 0.4% as against rise of 3% in Q1. Delayed reversal of monsoon rains negatively impacted  functioning of mining and construction sectors. Low electricity demand is likely outcome of comparatively week industrial output.

The continued fall in GDP growth rate may nudge the government for SOS steps such as fiscal stimulus and also another round of monetary losing, the RBI is scheduled to to announce its latest monetary review policy on December 5, 2019.

Further worry for the government is the fact that core sector growth has further contracted in the month of September, the core sector had contacted by 5.1 % whereas for October it further continued contraction and contacted by 5.8%. Apart from refinery products and fertilizers 6 other core sector industries contracted, while coal fell by 17.6 %,  electricity fell by 12.4%. Options for the government seem to be running out fast as the annual fiscal deficit target for 2019-20 has already been exceeded in the April to October period by reaching 102% of the targeted fiscal deficit for 2019-20.

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