India Q1 GDP growth hits 5-year low amid slower demand

04, Jun. 2019

NEW DELHI, NNA - India’s economic growth decelerated sharply to a five-year low in the January-March quarter, also taking GDP expansion for the last fiscal year to the lowest since 2014, amid a domestic cash liquidity squeeze and global slowdown.

The Ministry of Statistics and Programme Implementation released the latest gross domestic product data on Friday.

Key points:

―― GDP grew 5.8 percent from a year earlier in January-March, slowing from 6.6 percent in the final quarter of 2018 and underperforming China’s 6.4 percent growth in the first three months of 2019.

―― In the fiscal year to March, India’s GDP expanded 6.8 percent, down from 7.2 percent in the previous 12-month period. It was the slowest rate of growth since 6.4 percent in the year ended March 2014.

―― There was a broad slowdown in Q1, from agriculture to manufacturing, while government spending supported overall growth (+13 percent y/y vs. +6.5 percent in Q4).

―― The increase in private consumption was slower at 7 percent y/y in Q1 after rising 8.4 percent in Q4, reflecting tighter liquidity conditions, lower credit availability and sluggish wage growth.

―― The agriculture sector was down 0.1 percent y/y in January-March after growing 2.7 percent in October-December. It expanded 2.9 percent in the 12 months to March, slower than 5 percent in the previous year.

―― Manufacturing lost steam, growing 3.1 percent in Q1 after 8.1 percent in Q4, in the face of lower domestic and global demand.


―― Low liquidity in financial markets and risk aversion by investors dampened total demand in India. Consumer sentiment was sluggish on low wage growth, while exports were flat amid slower global demand.

―― Brokerage firm Edelweiss Broking Ltd. expects signs of recovery will emerge in the July-September quarter as the Reserve Bank of India is likely to ease further to make more cash available for economic activity and the government is expected to provide fiscal support.

―― The central bank will announce its policy decision on Thursday after meeting this week. It is expected to lower the key interest rate by 25 basis points to 5.75 percent after cutting 50 basis points this year.