'Economic Emergency': What Industrialists And Economists Are Saying About India's 5% GDP Growth

India’s economy grew at an annual rate of 5% last quarter, its slowest in more than six years, official figures released on Friday showed.

Government’s Chief Economic Adviser KV Subramanian said India’s GDP numbers indicated that growth, while still high, had shown some slowdown. 

What industrialists, economists are saying:

Biocon’s Kiran Mazumdar Shaw called the plummeting of GDP growth “shocking” and an “economic emergency” that should act as a wake-up call for the government to act more and do it fast.

“It is clear reflection that the economy is not just slowing down, but has come to a grinding halt,” Shaw said at the ‘India Economic Conclave 2019’ in Bengaluru, on Friday.

Mahindra Group Chairman Anand Mahindra tweeted:

Assocham President BK Goenka said, with the government and the Reserve Bank having common prescription, the economy should bottom out soon and things should improve in the coming quarters. 

Industry body FICCI said the slow growth indicated a “significant deceleration” in both investment and consumer demand.

FICCI president Sandip Somany expressed “deep” concerns over sluggishness in the growth momentum and said that the “the latest GDP growth numbers are below expectations.” 

He hoped that a series of measures being taken by the government and the central bank to reverse this slowing trajectory would help improve economic situation in the subsequent quarters, according to a FICCI statement.

Former prime minister Manmohan Singh was among economists who raised concerns about the economic slowdown.

On Sunday, he said, “The state of the economy today is deeply worrying. The last quarter’s GDP growth rate of 5 percent signals that we are in the midst of a prolonged slowdown. India has the potential to grow at a much faster rate but all-round mismanagement by the Modi government has resulted in this slow down.”

He also blamed “man-made blunders of demonetisation and a hastily implemented GST” for the state of the economy.

Aditi Nayar, Principal Economist at ICRA Ltd, said, “The pace of expansion of GDP and GVA in Q1 FY2020 was resoundingly lower than forecast, driven by a collapse in manufacturing GVA growth, even as the performance of most of the other sectors was largely along expected lines.”

Ranen Banerjee, Leader- Public Finance and Economics at PwC India said, while the situation may not be as bad given the headwinds the economy is facing, this will further dent sentiment and put downward pressure on consumption.

He also said the case for announcing enhanced government capital expenditure becomes further strong sacrificing fiscal prudence a few basis points to positively impact sentiment.

Fitch Group’s India Ratings and Research chief economist Devendra Pant said declining savings, especially household saving, was a major challenge for the economy and was leading to structural growth slowdown. 

“While the fiscal space to undertake counter-cyclical measures are very limited, we believe, the government would undertake some measures to provide a short-term boost to the economy,” he said.

After agriculture, real estate/ construction is the second-largest employer and also has huge backward and forward linkages with other sectors. So reviving real estate sector would be crucial both from the investment as well as consumption point of view, he noted.

(With PTI inputs)