Agri, manufacturing pull down Q3 GDP to sub 7%

Slowing farm, mining and manufacturing sectors pulled India's India's economic growth to a five-quarter low of 6.6% in October-December of 2018-19 from 7.2% in the previous quarter (July-September).

The government data showed that consumer spending, which contributes heavily to the country's economic growth, slowed 8.4% in the quarter under review from a high of 9.9% in the last.

Vindicating the trend in consumption slowdown, the Reserve Bank of India data earlier in the day showed that people did not turn up for loans from banks in large numbers in January.

Mining sector growth slipped to 1.3% in Q3 from 4.5% in the same period a year ago. The manufacturing sector also grew at a lower rate of 6.7% compared to 8.6% in the corresponding period last year.

Marred by uneven rainfall, depleted reservoir levels in key agrarian states and a drop in rabi crop sowing, agriculture grew at 2.7% compared to 4.6% a year ago. Worse, the data showed farm incomes continued to go down and agriculture was mainly pulled up by a growth in the livestock segment.

Two key members of the RBI monetary policy committee Chetan Ghate and Deputy Governor Viral Acharya had earlier this month warned of a farm sector slowdown and therefore suggested a status quo on policy rates but the RBI went with a repo rate cut of 25 basis points to 6.25%.

Manufacturing, the fulcrum of the Centre's flagship “Make in India” slowed in the December quarter but the construction sector continued to grow at a handsome 9.6% backed by growing demand from housing and road verticals.

The Central Statistics Office also revised downward the full-year (2018-19) economic growth to 7% from the earlier 7.2% but the high-frequency data such as car and two-wheeler sales, non-oil and gold imports indicated the January-March quarter economic growth could even be worse. But even at 6.6%, India continued to grow ahead of China in Q3.

Former Chief Economic Advisor Kaushik Basu feared growth slowdown could have an adverse impact on jobs. “Growth slowdown is worrying. Its connection to the slowdown in job creation deserves to be analysed quickly and carefully,” he said.

"Quarterly growth rates of 2018-19 puncture the claims of government. Q1 was 8%, Q2 was 7% and Q3 was 6.6%. This is the swan song of the BJP government. If Q4 growth rate declines further, as is expected, that will expose the government completely," former finance minister P Chidambaram said on GDP growth numbers.