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Barnabas Gan, Economist at UB Group, gives his opinion on the expected expansion of the Indian economy in the next periods.

Key Quotes

“Asia’s third largest economy is now growing at its slowest pace in over six years. India’s domestic economy started its fiscal year with a dismal tone, with growth decelerating to its slowest pace since March 2013 at 5.0% y/y in the first quarter of the current fiscal year. The GDP growth, which has now slowed for the fifth consecutive quarter, is likely reflective of the external headwinds and lackluster manufacturing momentum that was evident since the onset of the US-China trade tensions”.

“Beyond the US-China trade tensions, falling food prices and construction wages are likely the key drivers that left India’s huge rural population with falling income levels, which consequently sank domestic consumption growth to a mere 3.1% y/y in Q1 2019/20 (vs 8.1% y/y in FY2018/9). Unemployment levels are also at its highest level in over three years at 8.4% in August 2019, according to data by the Centre for Monitoring India Economy (CMIE), which added at India had lost 11 million jobs in 2018″.

“In addition, the slowdown in manufacturing and agricultural production also contributed to the overall slowdown”.

“Still, there are sectors that continued to register growth over 7.0%. According to the press release by the National Statistical Office, these sectors include ‘Electricity, Gas, Water Supply & Other Utility Services’, ‘Trade, Hotels, Transport, Communication and Services Related to Broadcasting’ and ‘Public Administration, Defence and Other Services’.

“In light of the slowdown, the government announced more boosters to support growth in view of the GDP slowdown”.

“Given the disappointing slowdown in growth Q1 2019/20, we are revising our full-year 2019/20 growth outlook to 6.0% y/y with downside risks, down from an initial outlook of 6.8%”.