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GDP slowdown to worsen, more rate cuts likely now

20 1 15

Going into an election with GDP slowing for two quarters (it will be three once the Jan-March numbers come in) and at a 6-quarter low can’t be good news for a government, though the flipside is that the central bank can be expected to make another two rate cuts of 25 bps each over the next 2-3 monetary policy reveiews due to sluggish growth and inflation remaining below target. From 8 % in Q1FY19, GDP growth fell to 6.6% in Q3FY19—the last time growth was so low was in Q1FY18 when it clocked 6%. In fact, the quarter-on-quarter growth is the slowest in five years if you exclude the demonetisation quarter of FY17.

Much of this, of course, was to be expected and, indeed, the signs of how the Jan-March 2019 quarter will turn out are evident from the sluggish growth in aggregate credit, automobile and property sales. Weak agriculture growth is an obvious problem area and, given close to half the work force is employed in the sector, has implications for how sustainable private consumption can be. With growth........

© The Financial Express