Four different macroeconomic data points released on Friday — GDP growth, fiscal deficit, unemployment numbers and core sector data — brought to the fore the enormous challenges the Modi 2.0 team faces in resurrecting the faltering economy and restoring the confidence of investors.
The four macro data points — albeit for different periods — present a less-than-optimistic picture of the economy, warranting some focussed handling by the new dispensation, economy watchers say.
GDP growth
The fourth-quarter GDP growth for 2018-19 came in at 5.8 per cent, much lower than the 8.1 per cent recorded in the same quarter the previous fiscal.
It was also lower than the 6.6 per cent growth recorded in the third quarter ended December 31, 2018, official data showed.
For the entire fiscal 2018-19, the GDP growth came in at 6.8 per cent, lower than the 7.2 per cent growth recorded in the previous fiscal.
Given the lower-than-anticipated GDP growth, expectations have increased on the possibility of an RBI rate cut in the upcoming monetary policy review, on June 6.
“Against the backdrop of a benign inflation trajectory and sharp slowdown in growth, we expect the Monetary Policy Committee (MPC) to cut rates at the June meeting,” B Prasanna, Group Head–Global Markets–Sales, Trading and Research, ICICI Bank, said.
Fiscal deficit
However, there was some good news on the fiscal deficit front with the 2018-19 reading coming in at 3.39 per cent of the GDP, marginally lower than the 3.4 per cent projected in the revised estimate of the budget.
In absolute terms, the fiscal deficit at the end of March 31 stood at ₹6.45 lakh crore, as against ₹6.34 lakh crore in the revised estimate.
Unemployment rate
There was bad news on the unemployment front with the Labour Ministry on Friday announcing that joblessness in the country was 6.1 per cent of total labour force during 2017-18, the highest in 45 years. This has confirmed the unemployment rate projected in a pre-election leaked report.
Data from the Labour Ministry showed that 7.8 per cent of all employable urban youth were jobless, while the percentage for the rural segment was 5.3 per cent. The joblessness among male (on an all-India basis) was 6.2 per cent, while it was 5.7 per cent in case of females.
Core sector output
Contraction in crude oil, natural gas and fertiliser output pulled down the aggregate growth rate of eight core infrastructure industries in April to 2.6 per cent. This was much lower than the 4.7 per cent growth recorded in same month last fiscal.
Monetary policy meet
“Against the backdrop of a benign inflation trajectory and sharp slowdown in growth, we expect the MPC to cut rates at the June meeting,” B Prasanna, Group Head – Global Markets – Sales, Trading and Research, ICICI Bank, said Madan Sabnavis, Chief Economist, CARE Ratings, said that the rating agency expects the country’s GDP to grow by 7.2 percent in 2019-20, 0.2 percent higher than year ago.
“There is a 50 percent chance that the RBI will go in for a rate cut by 25 percent in its June 2019 policy to give an impetus to the lagging growth,” he said.