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The Unfolding Economic Slowdown

Expansionary impulses to revive the economy are the need of the hour.


The growth rate of real gross domestic product (GDP) has dipped to 5% in the first quarter (Q1) of the current financial year, the lowest recorded in recent years. Both consumption and investment demands have contributed to this depressed economic situation. The private final consumption expenditure (PFCE) grew at 3.1% during Q1 of the current year compared to 7.3% a year ago. Previously, the PFCE growth had similarly contracted to 4.1% during the fourth quarter (Q4) of 2016–17, the quarter immediately following demonetisation. Gross fixed capital formation (GFCF) also exhibited a similar growth trend. It grew by 4% in Q1 of the current year against 13.3% in the previous year, and 2% in Q4 of 2016–17.

Most of the producing sectors, such as agriculture, mining, and quarrying, and manufacturing have witnessed a serious setback in growth during Q1 of 2019–20. Of this, the most worrisome has been the manufacturing sector, the gross value added (GVA) of which edged up by just 0.6% compared to a growth of 12.1% during the same period last year. During the quarter, the year-on-year (y-o-y) growth rates in the Index of Industrial Production (IIP) of major industries have remained meagre or suffered negative growth. Textiles limped up at 0.1%, leather products at 0.2%, paper and paper products at (-)14.2%, coke and refined petroleum at (-)2.2%, chemical products at 0.3%, rubber and plastic products at (-)4.1%, non-metallic mineral products at (-)11%, fabricated metal products at (-)9.8%, electrical equipment at (-)4.6%, other machinery and equipment at (-)1.6%, motor vehicles at (-)8.4%, and other transport equipment at (-)1.7%. The widespread slackening of growth across these major industries has had deleterious effects on the economy’s performance, and this is likely to linger on in the medium-term as well.

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Updated On : 1st Oct, 2019


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