After Finance Minister (FM) Nirmala Sitharaman announced Mega merger amongst Public Sector banks (PSBs) on Friday last, in an attempt to to do a damage control to the market sentiment, the announcement of the GDP numbers Central Statistical Office (CSO), 45 minutes after the FM’s press conference took away all the smile that was seen on every ones face. CSO announced that India's Gross Domestic Product (GDP) growth decelerated to a more than five-year low at 5 per cent in the June quarter of 2019-20, against 5.8per cent in the March quarter. This was way below analysts' expectations of economic growth at 5.7 per cent in the June quarter.
The sudden fall in GDP number has surprised many as majority of market participants expected that there will be a scale down in number but such a sharp fall in the GDP numbers was not anticipated and have raised many eyebrows.
VK Vijayakumar Chief Investment Strategist, Geojit Financial Services said, "The continuation of the slowdown in GDP growth was expected but the 5 per cent growth in Q1 is worse than expected. Decline in industrial production, particularly the slump in autos is the main reason for the poor numbers. But GDP growth figures will pick up in Q3 & Q4 benefitting from the low base of previous financial year. Also the rate cuts by the RBI will act strongly in Q3 (December) and Q4 (March quarter), since monetary policy impacts with a lag of two to three quarters. We need structural reforms like labour and land market reforms to stimulate and sustain growth."
S Ranganathan, Head of Research, LKP Securities, “Q1 GDP at 5per cent is below the 5.7per cent poll consensus estimates. June Quarter (FY20) GDP is the lowest we have witnessed in the past five years and key reasons for the miss are a decline in manufacturing, rural distress, liquidity tightening, and consumption slowdown. We expect the fiscal, monetary and regulatory measures announced recently to improve the situation".
Deepthi Mathews, Economist, Geojit Financial Services said, “GDP growth slowing down to 5 percent is indeed worrying. The number shows that the economy has not still entered the recovery path. Consumption not picking up has contributed to the overall slowdown. The positive impact of the measures adopted by the Central Bank and the government to recoup the economy is expected to reflect in the coming quarters”.