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.
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.
