GDP growth slips to 4.5% in Q2; RBI may cut repo rate by 25 bps next week

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Gross value added in manufacturing contracted by 1% in the quarter ended September.

India’s gross domestic product expanded 4.5% in the three months to September 30, its slowest pace since Narendra Modi took over as the prime minister. The GDP growth rate was 5% in the previous quarter and 7% in the same quarter last year. The GDP growth in the first half of the financial year (April-September) slipped to 4.8% compared with 7.5% in the year ago period. The GDP at constant prices was Rs 35.99 lakh crore in July-September period compared with Rs 34.43 lakh crore in the second quarter of the previous year.

The gross value added in the manufacturing sector contracted by 1% in the quarter ended September, compared with 6.9% growth in the year-ago period, according to the government data released by the National Statistical Office. The value added in farm sector grew at 2.1%, compared with 4.9% in the corresponding period last year. The GVA in construction sector slowed to 3.3% in the quarter from 8.5% in the year-ago period.

The economy is in the grip of a slowdown induced by a lack of demand. The Narendra Modi government has effected a major cut in corporate tax rates in September to boost the sagging economic growth. The Reserve Bank of India may effect the sixth repo rate cut in a row at its bimonthly monetary policy meeting to bring down the key policy rate to 4.90%. Key sectors such as electricity, gas, water supply, trade, hotel, transport and communication grew at a slow pace compared to the year ago period.

Gross Fixed Capital Formation, a key investment matrix, stood at Rs 10.83 lakh crore in Q2 against Rs 11.16 lakh crore in the same period last year. The country’s fiscal deficit at the end of October stood at Rs 7.2 lakh crore, 102.4% of the budgeted amount for the entire fiscal.