Indian economy appears to have slowed down in FY19: FinMin report

Wednesday 08th May 2019 06:47 EDT

The Indian economy has slowed down slightly in the last fiscal due to declining growth in private consumption, slow increase in fixed investment and muted exports. However, it is still the fastest growing major economy, according to the department of economic affairs under the Finance Ministry's monthly report.

The Ministry, however, affirmed that India continues to remain the fastest growing major economy and is projected to grow faster in the upcoming years. It further talked about the challenges in reversing the slowdown of the growth in agriculture. "On the supply side, the challenge is to reverse the slowdown in growth of agriculture sector and sustain the growth in industry," it observed.

The report indicated the decline of headline inflation in 2018-19 which is measured using the consumer and wholesale price indices. Though inflation has firmed up slightly in recent months. As percentage of the GDP, the current account deficit showed improvement in Q3 and has projected further improvement in Q4 of 2018-19 because the dip in imports has improved the merchandise trade deficit, as per the report.

On the domestic demand, the report observed that private consumption in Q4 of 2018-19 has also decreased in line with declining real GDP growth. It is reflected in the drop in growth of two-wheeler sales towards the end of the year. On the external front, the report said that the current account deficit as ratio to GDP is set to fall in Q4 of 2018-19, which will limit the leakage of growth impulse from the economy. The fiscal deficit of the Central government has been gliding down to the FRBM target. Monetary policy has attempted to provide a fillip to the growth impulse through cuts in repo rate and easing of bank liquidity.

The room for this monetary easing has been created by low inflation in 2018-19, although it has started to inch up in last few months of the year, the report said. The appreciation of real effective exchange rate in Q4 of 2018-19 can pose challenges to the revival of exports in the near future.

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