Worries for govt as Q2 GDP growth likely to be below 5%

Worries for govt as Q2 GDP growth likely to be below 5%

July-September quarter GDP numbers to be released on 28-Nov-2019

The government’s worries over the economy is likely to increase as the GDP growth rate for the three-month period ending September 30 could be below 5 per cent.

The Central Statistics Office will release this data on Friday.

GDP growth rate in real terms was 7 per cent for the three-month period ending September 30 during the 2018-19 fiscal. The growth rate has since been sliding continuously with 6.6 per cent during October-December of FY19, 5.8 per cent during January-March of FY19 and further to 5 per cent during April-June of FY20.

With all sectors showing signs of stress — industry or agriculture and even services — almost all research agencies see a further dip in the growth rate, with projections in the range of 4.3 to 4.7 per cent.

Although, some economists term this as ‘growth recession,’ Opposition parties are calling it a recession.

Recession or slowdown?

This issue figured in the Rajya Sabha on Wednesday. Finance Minister Nirmala Sitharaman ruled out the possibility of a recession.

“It is because if actually you are looking at the economy with a discerning view, you see that the growth may have come down but it is not a recession yet or it won’t be a recession ever. So, consciously, all of us have to rise above because the economy also has a very big foundation and sentiments,” she said.

Technically speaking, there is difference between a slowdown and a recession.

An economic recession signifies a drop in the GDP, while a slowdown is merely a decline in the growth rate of the GDP.

A slowdown usually precedes a recession, but does not necessarily lead to one.

Also a recession takes place only when there is two consecutive quarters of decline in GDP.

Since the GDP is still growing albeit at a slow pace, India may be facing only a slowdown and not a recession.

India Ratings in its latest research report says that despite a favourable base effect, declining growth momentum suggests that even the second half of the current fiscal (October-March) will now be weaker than previously forecast and is likely to come in at 6.2 per cent.

It estimates the growth rate for the entire fiscal to be at 5.6 per cent and that too will require some heavy lifting by the government.

Although government expenditure did not witness much traction in the first three months (April-June) due to Parliamentary elections, it picked up significantly in the second three months (July-September) of the current fiscal. With almost no headroom available, the government will have tough time raising expenditure.

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