India’s economic growth dips further to hit 6-year low of 4.5%
Signs of slowdown were also visible on Friday when October core sector growth contracted 5.8%
The Indian economy in the September quarter decelerated to 4.5%, lowest in 26 quarters, from 5% in the preceding quarter as manufacturing output contracted.
During the second quarter, only government expenditure supported growth by growing at 11.6%, while financial services sector grew 5.8%. The previous low of 4.3% was seen during January-March 2012-13.
The fall in the GDP growth rate, which is indicative of further deepening of economic downturn in Asia's third largest economy will likely ratchet up the clamour for a fiscal stimulus from the government. The persistent slowdown may also force the central bank to go for another round of interest rate cuts on 5 December in its monetary policy review.
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Separately, data released by the industry department showed the eight infrastructure sectors represented by the core sector data contracted for the second consecutive month by 5.8% in October, signaling the worst for the Indian is not be over yet. In September, core sector had shrunk by 5.1%. During the month, six out of the eight infra sectors contracted except refinery products and fertilizers. Output of coal (-17.6%) and electricity (-12.4%) fell by double digits.
In the April-October period, the central government exceeded its annual fiscal deficit target at 102.4% while it exhausted 112.5% of the revenue deficit target, according to data released by Controller General of Accounts.
China's GDP growth slowed to 6% in September quarter, the weakest quarterly growth rate since 1992, down from 6.2% in the previous quarter.
While Care Ratings, ICRA, Edelweiss expects the economy to have expanded at 4.7% in Q2, DBS and Nomura are on the lower band of the forecasts with projections of 4.3% and 4.2% respectively. New Delhi-based think tank NCAER has projected GDP growth at 4.9% for both the second quarter as well as for the full financial year ending 31 March.
The Narendra Modi administration has taken a series of steps to reverse the growth slowdown, including a cut in the corporate tax rate in September to 22% from 30% earlier for companies not availing themselves of any tax breaks, and to 15% from 25% for new manufacturers. The cabinet cleared a proposal last week to set up a ₹25,000 crore debt fund to complete stalled housing projects, a move expected to boost cement and steel sectors in the months ahead.
