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The Statistics Office on Thursday said economic growth for the third quarter ending December 31, 2018 slowed to 6.6 per cent, the lowest in six quarters. It also cut the estimate for the full fiscal by 20 basis points to 7 per cent, which is the lowest in the last five years.
The latest number is slightly lower than market expectations. Though all the three segments — agriculture, industry and services — slowed down, the much bigger impact was seen in agriculture and manufacturing which affected the quarterly growth number. Now experts feel with second advance estimate of 7 per cent for full fiscal, growth during the fourth quarter of the current fiscal i.e. January-March 2019 might slip to 6.1, from 6.5 per cent. This number will be announced in May.
For the full fiscal, GDP growth has been lowered as there was upwards revision in 2017-18 (FY18) GDP growth rate to 7.2 per cent, from 6.7 per cent. Some divergent trends in the first and second advance estimates for FY19 include private final consumption expenditure growth which was revised upwards to 8.3 per cent from 6.4 per cent and investment growth lowered to 10 per cent, from the earlier estimate of 12.2 per cent.
However, the size of the economy (nominal GDP) in FY19 is now estimated as ₹190.54 lakh crore as against ₹188.41 lakh crore. Experts feel that this will help the government to achieve fiscal deficit target at 3.4 per cent. This will even help keep the financial year 2020 fiscal deficit at 3.4 per cent. However, with real growth and inflation being low, achieving 11.5 per cent nominal growth will be tough, they said.
Devendra Kumar Pant, Chief Economist with India Ratings (Ind-Ra), said: “Based on revised first three quarters and annual numbers, Ind-Ra’s calculation shows that the GDP growth in Q4 has to be 6.5 per cent to attain overall 7 per cent growth in financial year 2019. This on the face of it looks plausible; however, unless exports in Q4 grow 14 per cent attaining 7 per cent growth in financial year 2019 will be difficult. Under the current scenario this looks difficult.”
According to him, the calculation also shows that fixed investment growth in Q4 has to grow at 7.7 per cent. Though this is much lower than Q3 growth of 10.6 per cent, central government capex growth contracting during September 2018 to January 2019, this will not be easy. On GVA (Gross Value Added) front, the manufacturing sector growth will have to grow at 6.8 per cent on top of high growth of fourth quarter of financial year 2018 is also appears to be difficult to achieve.
Core Sector
Earlier, another set of data revealed that the eight core infrastructure industries’ growth in January declined to 19 months low at 1.8 per cent, as against 2.7 per cent in December. Top two contributors to the core sector — refinery products and electricity — contracted in January. In fact, electricity sector growth in January (-0.4 per cent) is lowest in the last 71 months. The last time electricity sector witnessed contraction was in February 2013. Cement, fertiliser, steel and natural gas provided support to growth.
“Declining trend in core sector growth from October 2018 suggests continued weakness in industrial activities and a weak second half economic growth. Expect a low industrial growth in the month of January,” Pant said.
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