BENGALURU, Aug 30 (Reuters) – India’s economy had annual growth of 5.0% in the April-June quarter, the slowest in more than six years, dragged down by weak consumer demand and private investments, government data showed on Friday.
A Reuters poll of economists had forecast annual growth of 5.7% for April-June, compared with a 5.8% rise the previous quarter.
For April-June 2018, India reported 8% growth.
COMMENTARY MADHAVI ARORA, LEAD ECONOMIST, EDELWEISS SECURITIES, MUMBAI “The 1QFY20 GDP print at 5% (Edelweiss: 5.6%) is clearly a shocker, and confirms that the growth slowdown is more entrenched, thus giving further scope for coordinated fiscal and monetary response.”
“The growth slump clearly reflects that the slowdown is beyond just the cyclical aspects and policymakers need to address the structural constraints to ensure secular growth picks up ahead.
“We do not see much immediate momentum in the growth picture.
Near-term growth dynamics are unlikely to change dramatically.” KUNAL KUNDU, INDIA ECONOMIST, SOCIETE GENERALE, BANGALORE “The sharply lower growth caught me by surprise. The economic slowdown was palpable but I thought the lower deflator would come in handy. But the extent of slowdown is beyond what I expected.”
“Yes, this does call for some fiscal stimulus by the government because monetary policy alone cannot do the heavy lifting for the economy.
For immediate impact, some sort of stimulus is required for sure.
“Policy announcements are equally important but the impact would be felt in the medium- to long-term only. Whether the government can actually plan some stimulus is not very certain.
“There definitely is room for further rate cut.
Prior to the data release, we were expecting another 40bp rate cut by the RBI.”
SAKSHI GUPTA, SENIOR ECONOMIST, HDFC BANK, GURUGRAM “GDP growth has come in line with our forecast of 5%-5.2%. The slowdown is being felt across sectors, including agriculture, manufacturing and services.
A strong base effect from last year only added to the pain.”
“Going ahead, we are looking at activity improving from these lows. This could be the bottom for the current slowdown.
“Policy stimulus by the RBI and the government along with normal monsoons will provide some relief in the second half. For the year, we expect GDP growth at 6.5%.
“The RBI is likely to deliver another 40 bps in rate cuts this year.
While this will address the cyclical part of the current slowdown, the structural issues could continue to plague the system this year.” SIDDHARTHA SANYAL, CHIEF ECONOMIST, BANDHAN BANK, KOLKATA “Very clearly the slowdown has been much stronger than expected.
In this quarterly print, the support from consumption – which is typically a strong point of resilience for the Indian economy – has also been pretty weak.”
“Policy support could be expected from the government through a variety of measures, but not necessarily through additional fiscal spending.
The Reserve Bank of India looks set for further easing of interest rates. We remain bullish on Indian bonds in the near term.”
DEEPTHI MATHEW, ECONOMIST AT GEOJIT FINANCIAL SERVICES, MUMBAI “GDP growth slowing down to 5% is indeed worrying. The number shows that the economy has not still entered the recovery path.
Consumption not picking up contributed to the overall slowdown.”
“The positive impact of the measures adopted by the central bank and the government to recoup the economy is expected to reflect in the coming quarters.
A PRASANNA, HEAD-FIXED INCOME RESEARCH, ICICI SECURITIES PRIMARY DEALERSHIP, MUMBAI “Q1 GDP data was much weaker than what we had anticipated. The manufacturing, finance, insurance, real estate sectors have seen particularly weak growth.”
“Sentiment and activity levels have been weak in the current quarter as well. Government steps and monetary easing should help growth pick up in H2. Still, the full-year growth is likely to be weak at 6.5% with a downside bias.
“We expect the MPC (Monetary Policy Committee) to react to this data by again cutting repo rate in the October policy by a minimum of 25 basis points.”
ANAGHA DEODHAR, ECONOMIST, ICICI Term Insurance Plan SECURITIES, MUMBAI “We were expecting Q1 growth of around 5.7%.
Given that the actual number is sharply below our expectation (at 5%), we believe the full-year growth could be around 6.5%-6.6%.”
“We expect a rate cut in the October (monetary policy) review.
“While there are clearly signs of economic slowdown, a high base is also partly to be blamed. Slowdown in the auto sector, which accounts for a large chunk of manufacturing activity, clearly played a drag on growth.
“The stimulus measures they (government) announced last week are inadequate to boost growth.
Today, they announced merging of PSBs (public sector banks). Although PSB capitalisation is positive to some extent, the measures are too little too late.
“It will have to be a mix of monetary and fiscal measures. Although fiscal measures are better targeted, the government doesn’t have enough room. Sector-specific sops and smooth GST refunds to exporters are some of the things they (government) can work on.” RAJESH CHERUVU, CIO, VALIDUS WEALTH, MUMBAI “While the data is backward looking, markets had been anticipating the slowdown correctly by selling off in the last few weeks. The confirmation of dampening in the manufacturing sector remains a stand-out: growing only 0.6% yoy vs. 12% yoy (Q1FY19).”
“The government too seemed to have caught a drift of the brakes being slammed on the nation’s GDP and the 5% growth delivered has clearly underwhelmed expectations of 5.7%. The finance minister has been vigorously spewing out reform after reform over the last week, albeit admittedly, they were more of the same: PSU recapitalisations and their mergers.
“No doubt, the NHAI’s (National Highways Authority of India) mounting debt would also be looming on the sovereign balance sheets in one way or another.
Resorting to monetary policy easing could be back on the cards again unless the government comes up with a credible, detailed use of the RBI’s windfall dividends.”
RUPA REGE NITSURE, GROUP CHIEF ECONOMIST, L&T FINANCIAL HOLDINGS, MUMBAI “National accounts data is consistent with the picture suggested by leading indicators for Q1, FY20.
GDP growth has decelerated to 5% – the lowest since Q4, FY13.”
“There is an acute slowdown in the manufacturing and agri sectors on the back of a slowdown in aggregate demand – both consumption and investment demand.
“Except for mining activity and power generation, all other productive sectors have slowed on a y-o-y basis. In our opinion, the weight of structural factors has gone up in the slowdown and mere monetary stimulus may not work beyond a limit.” GOURAV KUMAR, PRINCIPAL RESEARCH ANALYST AT FUNDSINDIA.COM, CHENNAI “Given the indications we have seen in the past few months, growth was expected to be slow. However, 5% is far below street estimates of 5.6%-5.7% and does come as a surprise. This was primarily driven by lower growth in private consumption.”
“Manufacturing growth staying almost flat is also worrying and immediate steps are needed to revitalise this sector. An overall recovery may take another couple of quarters as the NBFC sector is still recovering from the liquidity crisis.” (Reporting by Chandini Monnappa, Derek Francis, Chris Thomas and Sachin Ravikumar in Bengaluru, Editing by Subhranshu Sahu)
