Slide in GDP growth poses big challenge for new govt
K R Srivats New Delhi | Updated on May 31, 2019 Published on May 31, 2019 BUSINESS LINE
Hopes of an RBI rate cut increases
Economic slowdown could pose the biggest challenge for the Modi 2.0 team going by the GDP growth data released by the Central Statistics Office (CSO) on Friday.
India’s GDP growth in the fourth quarter of 2018-19 grew 5.8 per cent, the lowest pace in the past 20 quarters, that is since June 2014. GDP grew 8.1 per cent in the January-March 2018 quarter.
The latest print of 5.8 percent — the lowest quarterly print in 2018-19 — was also lower than the 6.6 per cent GDP growth recorded in the third quarter ended December 31, 2018, official data showed.
The annual growth for 2018-19 has also been revised downwards by 20 basis points to 6.8 per cent, from 7 per cent as per the second advance estimates.
This reading of 6.8 per cent is the lowest in the past five years. In 2017-18, GDP growth came in at 7.2 per cent. Given the lower-than-anticipated GDP growth, expectations have increased on the possibility of the RBI cutting the policy rate in the upcoming monetary policy review on June 6.
Monetary policy meet
“Against the backdrop of a benign inflation trajectory and sharp slowdown in growth, we expect the MPC to cut rates at the June meeting,” B Prasanna, Group Head – Global Markets – Sales, Trading and Research, ICICI Bank, said Madan Sabnavis, Chief Economist, CARE Ratings, said that the rating agency expects the country’s GDP to grow by 7.2 percent in 2019-20, 0.2 percent higher than year ago.
“There is a 50 percent chance that the RBI will go in for a rate cut by 25 percent in its June 2019 policy to give an impetus to the lagging growth,” he said.
There was bad news on the unemployment front with the Labour Ministry on Friday announcing that joblessness in the country was 6.1 per cent of total labour force during 2017-18, the highest in 45 years.This has confirmed the unemployment rate projected in a pre-election leaked report.
Labour Ministry’s data showed 7.8 per cent of all employable urban youth being jobless, while the percentage for the rural was 5.3 per cent. The joblessness among male (on all India basis) was 6.2 percent, while it was 5.7 per cent in case of females.
Published on May 31, 2019