Context: India's Gross Domestic Product continued its downward spiral for the seventh consecutive quarter, falling to 4.5 percent in the second quarter (July-September) of the year 2019-20.
Prelims: Economic and Social Development Sustainable Development, Poverty, Inclusion, Demographics, Social Sector initiatives, etc.
Mains: GS III- Indian Economy and issues relating to planning, mobilization of resources, growth, development, and employment.
The GDP numbers for the July-September quarter come after six consecutive quarters of falling GDP growth rate. The GDP growth rate for the first quarter of 2019-20 settled at 5 percent, a six-year low. The slowdown in economic growth has taken away from India the tag of the world's fastest-growing major economy to China. India's growth rates in the Q4 2018-19 and Q1 2019-20 were slower than that of China, which is a much bigger economy.
In the second quarter (July-September) of the year 2019-20, India's GDP grew at the slowest pace in 6.5 years. Also, growth was not fuelled by private consumption or investment, the prime drivers of the economy, but through government spending which surged in recent quarters.
- Among the slowest: GDP grew at 4.5% in the latest quarter (July-Sept, FY20). It is the third slower rate of growth since FY06. The graph shows GDP growth rates across two base years- 2004-05 and 2011-12.
- Fuelled by Government: Consumption (Private Final Consumption Expenditure- PFCE) picked up marginally due to festive season, while investment (Gross Fixed Capital Formation- GFCF) slipped further in the latest quarter. But, government expenditure (Government Final Consumption Expenditure- GFCE) recorded a steep rise.
- The slowdown in Industry: The fall in consumption and investment impacted the industry segment un the latest quarter. Particularly, the manufacturing sector (-1% growth) and the mining sector (-0.1% growth) recorded the second slowest since FY15. The construction sector slipped further while the agriculture sector remained stagnant.
- Riding on services: The service sector growth, though not as muted as the industry segment, recorded many lows. Trade, hotels, transport services registered the slowest growth in the latest quarter since 2015. The only component which saw a steep rise was the public administration and defence services, which were mostly fuelled by the Government.