India: Q2-FY20 GDP growth slowed to a six-and-a-half-year low – Standard Chartered

Commenting on the second quarter (the fiscal year 2019-2020) Gross Domestic Product (GDP) from India on Friday, "GDP growth slowed to a six-and-a-half-year low on broad-based weakness across sectors," noted Standard Chartered analysts.

Key quotes

"We maintain our GDP growth forecast at 5.3% for FY20 (year ending March 2020), as Q2-FY20 real GDP growth at 4.5% and gross value added (GVA) at 4.3%, were in line with expectations. We highlight three takeaways from the six-and-a-half-year low quarterly GDP growth print."

"First, the slowdown has been broad-based; most sectors recorded economic activity slipping to a multi-year low. For instance, growth in industry was the weakest since the series began in 2011-12, as manufacturing contracted on demand weakness.

"Second, robust government spending and a reduced net export deficit contributed significantly to headline GDP. In fact, GDP excluding net exports was the weakest since FY13, underlining sluggish domestic demand. India persistently runs a trade/current account (C/A) deficit; a narrower deficit on weak domestic demand adds to headline GDP."

"Third, nominal GDP at 6.1% (FY19: 11.2%; Q1-FY20 at 8.0%) was the weakest ever recorded; this will likely weigh on tax revenue collection and thus challenge management of the fiscal deficit. We expect the FY20 central government fiscal deficit to be 3.8% of GDP, wider than the budgeted 3.3%."