As India's second-quarter economic growth slowed sharply to 4.5 percent, former economic affairs secretary Subhash Chandra Garg on Friday said that country's gross domestic product (GDP) slowdown is getting deeper, but the rural economy is showing signs of revival.
"First half at 4.6 percent is really quite worrying. Third-quarter seems to be shaping up as indicated by the core industries data with coal production, electricity going down at such a sharp pace, it seems that things are still not out of the woods,” he said.
However, Garg said he is worried about gross fixed capital formation which stood at 0.9 percent, as it indicates stalling of capital investment across many sectors.
Garg said slowdown on the revenue side is a bigger problem for the government as it will not be able to contain the fiscal deficit to anywhere near 3.3 or 3.5 percent and it might tend towards 4 percent going forward.
The GDP expansion rate moderated from 5 percent recorded in April-June 2019 and is much weaker than the 7 percent growth registered in July-September 2018, according to official data.
The major factor in the GDP fall was manufacturing contracting by 1 per cent. A separate data showed core infrastructure industries' output declining 5.8 per cent in October, the biggest contraction since at least 2005.
The GDP growth rate in the second quarter of the current fiscal year (April to March) is the slowest since January-March 2013 and marks six consecutive quarters of slowing growth -- a first since 2012.
This despite the Narendra Modi-led government taking several steps -- including slashing corporate taxes, setting up a special real-estate fund, merging banks and announcing the biggest privatization drive ever -- to revive investment climate and bolster economic growth.