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Slow down in FY19 on demand, investment, exports: FinMin report.


Date: 03-05-2019
Subject: Slow down in FY19 on demand, investment, exports: FinMin report
India's economy slowed down slightly in the last fiscal due to declining growth in private consumption, slow increase in fixed investment and muted exports though it is still fastest growing major economy, says the Finance Ministry's monthly report. 

"The Indian economy is the fastest growing major economy and is projected to grow faster in the coming years. However, India's economy appears to have slowed down slightly in 2018-19. The proximate factors responsible for this slowdown include declining growth of private consumption, tepid increase in fixed investment, and muted exports", said the monthly report for March from the North Block. 

It further says there is slowdown of growth in agriculture and sustained growth in industry as well as some challenges. 

"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 Finance Ministry said the Headline inflation - measured using the consumer and wholesale price indices - declined in 2018-19 though inflation has firmed up slightly in recent months. 

The current account deficit, as percentage of the GDP, improved in Q3 and is set to further improve in Q4 of 2018-19 as the dip in imports has improved the merchandise trade deficit, as per the report. 

In line with declining real GDP growth, private consumption in Q4 of 2018-19 has also declined as reflected in the drop of growth of two-wheeler sales towards the end of the year, the report observed on the domestic demand. 

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 monthly report said. 

The real effective exchange rate has appreciated in Q4 of 2018-19 and could pose challenges to the revival of exports in the near future. Increase in foreign exchange reserves in Q4 of 2018-19 on account of improvement in trade balance has increased the import cover for the economy, the ministry said. 

"The implied real GDP growth in Q4 of 2018-19 was lower; slowing of real growth rate of imports signal this slowdown in GDP growth, " the report noted. 

It also pointed out that while Gross Fiscal Deficit of the Centre has steadily declined in last few years, capital expenditure has been volatile. 

Source: economictimes.indiatimes.com

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