In a major setback to the govt’s efforts to revive the economy, the latest GDP figures have been utterly disappointing.
In the July-Sep quarter, the GDP growth rate fell to just 4.5%, the lowest in more than six years since the Jan-March quarter of 2012-13.
Reasons for low growth rate
This comes mainly on account of weak manufacturing, falling consumer demand, falling private investment, and a drop-in exports due to a global slowdown.
In terms of sectors, industry recorded its worst-ever quarterly growth rate of 0.5% since June 2012, While manufacturing contracted by 1%, service sector growth fell to 6.8%, the lowest in over 5 years.
Fiscal deficit rising
India’s fiscal deficit in the first seven months till October stood at Rs 7.2 lakh crores, which is more than the budgeted target for the entire financial year.
Not surprisingly, GST collections have also been less than Rs. 1lakh crore for three consecutive months ending October.
Nothing seems to be working
The govt. measures to stimulate the economy, by withdrawing higher taxes on foreign investors, a mega-merger of the state-run banks and a reduction in corporate taxes are yet to produce any result.
The RBI’s move to boost the economy by lowering the repo rate, five times during the year has also been unfruitful.
Relevant for GS Prelims & Mains Paper III; Economics