Economy slumps to 7-year low, GDP growth slows to 5 pc in Q1 FY20

The economic growth slowed to a seven-year low of 5 per cent in April to June quarter from 8 per cent a year ago, government data showed on Friday.

The slowdown was largely due to a sharp dip in the manufacturing sector and agriculture output, said the Ministry of Statistics and Programme Implementation in a statement.

The previous low was recorded at 4.9 per cent in April to June 2012-13. Consumer demand and private investment have weakened amid global trade frictions and dampening business sentiment.

The manufacturing sector grew by 0.6 per cent as compared to a growth of 12.1 per cent in Q1 2018-19. Agriculture, forestry and fishing' sector grew by 2 per cent as compared to growth of 5.1 per cent in Q1 2018-19.

On the other hand, mining and quarrying sector grew by 2.7 per cent as compared to a growth of 0.4 per cent in the corresponding quarter of previous fiscal. Electricity, gas, water supply and other utility services sector grew by 8.6 per cent as compared to growth of 6.7 per cent in Q1 2018-19.

Although the Reserve Bank of India has cut the key lending rate four times in succession by a total of 110 basis points, several economists are apprehensive of this translating into growth soon. One basis point is one-hundredth of a percentage point.

The ongoing economic slowdown has started hurting corporates as well, with companies reporting a sharp decline in both revenue and profit growth numbers in the June quarter.

The passenger vehicle industry suffered its worst performance in 19 years last month with a 31 per cent drop in sales and the ninth consecutive month of declining sales, underscoring a sharp decline in demand.