India's GDP Growth Drops to 5% for First Quarter of FY20, Slowest in Six Years

New Delhi: India’s economy expanded at its slowest pace in over five years for the first quarter of fiscal year (FY) 2019-2020, according to official government data released on Friday evening.

The gross domestic product (GDP) growth rose just 5% for the quarter ended June 2019, in a development that reinforces concerns over a slowing down of the Indian economy.

Lower growth, data shows, is primarily due to a sharp deceleration in the manufacturing sector and sluggish agriculture output. In addition to this, ‘consumption growth’ was also weak – private final consumption expenditure growth fell to 3.1% in Q1 FY20 as compared to 7.2% in the previous quarter.

The numbers that were released on Friday are below general market expectations: most estimates had predicted that Q1 growth would be between 5.7-5.8%

Growth is down compared to the 5.8% recorded in Q4 FY19 and the 8% that the Indian economy hit one year ago in Q1 FY19.

The last time that quarterly data was this low was in the Q1 of FY13, when GDP growth was recorded at 4.9%.

“Q1 FY20 GDP growth at 5.0% was 25 quarter low. The growth slowdown was led by private final consumption expenditure, which grew 3.1% only (18 quarter low). Investment demand also remained lackluster and fixed capital formation grew 4.0% (4QFY19: 3.6%). Only government expenditure provided support to growth and increased 8.8%,” said Devendra Pant, chief economist, India Ratings and Research (Fitch Group), in a statement.

“While general elections in April-May 2019 had some impact on investment growth, collapse of private consumption demand from 10.6% in 4QFY18 to 3.1% in 1QFY20 is real cause of concerns. Both structural and cyclical issues are plaguing Indian economy and in order to bring economy back to a respectable growth path both short-term and long term measures are required,” the statement added.