07:32 PM
Let’s sum it all up for you with 3 numbers that paint a grim image
The second quarter GDP grew at 4.5%. The second quarter includes the months of July, August and September. The growth for the first quarter stood at 5%. In gross value added terms, the economy grew at 4.3 percent compared to 4.9 percent in the previous quarter. Core sector output for October contracts further to 5.8%. The index was dragged down by electricity which reported a de-growth of 12.4% vs -3.7% in September. In the midst of all this a new concern has surfaced for the government of India, the fiscal deficit target has been breached. The fiscal deficit for the period April-October was recorded at 102.4% crossing the full year target underlining the fiscal concerns for the government.
07:18 PM
Dr. Sunil Sinha, Principal Economist, India Ratings and Research ( Fitch Group) on GDP data
The 2QFY20 GDP growth at 4.5% is in line with India Ratings’ (Ind-Ra) projection of 4.7%. Also as expected the slowdown in GDP growth is largely on account of the slump in consumption expenditure and degrowth in exports. But for the government expenditure growth, 2QFY20 GDP growth would have been much lower. Investment as measured by gross fixed capital formation in any case has been down for last two quarters and again came in at just 1.0%. This shows that economy is passing through a declining growth momentum and there is no easy way out. Therefore Ind-Ra believes under the current domestic and global macro environment the government will have to do the heavy lifting to support growth.
06:54 PM
Ranen Banerjee, Leader Public Finance and Economics from PwC India reacts to the GDP falling to 4.5%
The second quarter GDP numbers are in line with expectations. It becomes more imperative for a fiscal led priming as the monetary policy interventions clearly are not transmitting. Thus, just to depend on another rate cut by RBI in the upcoming MPC meeting may not be sufficient. The situation demands a coordinated fiscal priming on areas with higher multipliers and where spends could be immediate combined with a monetary policy push to address the effective transmission of rate cuts to the NBFCs. Effect of rural demand uptick on Q3 numbers will be crucial to avert a sub 5% annual growth rate.
06:53 PM
ICRA’s principal economist, Aditi Nayar reacts to Fiscal Deficit and Core sector numbers
With the Government’s fiscal deficit for the first seven months of FY2020 recording a YoY increase of 11%, and standing at 102.4% of the budget estimates for the full year, concerns persist on the extent of the eventual fiscal slippage that is likely in the current year. With a marginal 1.2% rise in the GoI’s gross tax revenues in April-October 2019, mixed outlook for economic growth in H2 FY2020, and the likely impact of the cut in corporate tax rates, ICRA expects the GoI’s gross tax revenues to trail the FY2020 RBE of Rs. 24.6 trillion by a considerable Rs. 3.0-3.5 trillion. A portion of this would be shared by the states through lower tax devolution to them, while some of the shortfall would be absorbed by the transfers from the RBI, which are higher than budgeted by Rs. 0.6 trillion. On balance, we estimate the revenue receipts of the GoI could be Rs. 0.4-1.1 trillion lower than the FY2020 BE, which could translate into a fiscal slippage of up to 55 bps in FY2020. The sharp worsening in the performance of electricity generation and cement in October 2019, offset the sequential improvements in refinery production, fertilisers and coal, resulting in an even deeper contraction of the core sector output in that month. Overall, six of the eight constituents of the core sector displayed a YoY decline in October 2019, partly on account of disruption caused by heavy rainfall, as well as fewer working days related to the festive season.
05:54 PM
Mining and Quarrying
Quarterly GVA at Basic Prices for Q2 2019-20 from ‘Mining and Quarrying’ sector grew by 0.1 percent as compared to growth of -2.2 percent in Q2 2018-19. Production of Coal, Crude Oil and Natural Gas and IIP Mining registered growth rates of (-) 10.3 percent, (-) 5.1 percent, (-) 2.6 percent and (-) 1.2 percent, during Q2 of 2019-20 as compared to 6.2 percent, (-) 4.4 percent, (-) 2.0 percent and 0.9 percent respectively, during Q2 of 2018-19.
Factory output shrank 4.3%; Lowest in almost 8 years
As per the Index of Industrial Production, factory output contracted 4.3% in September, the lowest in almost eight years in this series, which began April 2012 (with 2011-12 as the base year) and the lowest since October 2011 when compared with the earlier series with base year 2004-05. IIP had contracted 5% in October 2011.
