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India's GDP to grow at slowest pace in 5 years in FY19

The government has slashed FY19 GDP estimate to 7 per cent from 7.2 per cent earlier, which will put India's growth rate at a five-year low for the current fiscal

October-December GDP growth came in at 6.6 per cent, which was slowest in five quarters. Analysts in an ET NOW poll had projected a growth of 6.8 per cent.

Core sector growth in January also slowed down to 1.8 per cent against 2.7 per cent on a sequential basis and 6.2 per cent on a yearly basis.

The size of the Indian economy is now seen at Rs 190.5 lakh crore, which makes India’s GDP at $2.7 trillion. India’s nominal GDP growth is seen at 11.5 per cent in FY19 against 11.3 per cent last year.

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Farm growth is seen at a slower pace at 2.7 per cent vs estimate of 3.8 per cent earlier. Industry growth is seen slightly slower at 7.7 per cent vs 7.8 per cent estimate earlier and services growth estimate is marginally revised upwards to 7.4 per cent.

If we look at the pace of growth between FY19 and FY18 growth, there are visible signs of slower farm and allied activities growth at 2.7 per cent against 5 per cent in FY18.

FY19 Industry growth is seen better at 7.7 per cent vs 5.9 per cent YoY led by improved construction and manufacturing growth. FY19 services growth is seen slower at 7.4 per cent against 8.1 per cent YoY largely due to slower pace of growth in Trade, hotels transportation and lower government spending.

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The good news is gross fixed capital formation or investment growth is seen picking up to 10 per cent in FY19 from 9.3 per cent in FY18.

Economists believe that if inflation remains under control, there could be a case for RBI to cut rates further to support economic growth. RBI in its February monetary policy cut rates by 25 basis points and changed stance thereby turning its focus on supporting growth.
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