The growth rate of Gross Domestic Product (GDP) of India in the third quarter slipped down to 6.6 per cent which is the slowest in the last few quarters. Earlier, India has revised the forecast of the growth rate of GDP in the fiscal year 2018-19 from 7.2 per cent to 7 per cent.
The key factors which are behind the sub-7 per cent growth are the weaker domestic and external demand. However, the GDP growth rate in Q3 for India is still higher than its neighbouring and manufacturing giant China which is at just 6.4 per cent.
In the financial year of 2018-19, the economy recorded the GDP growth rate at 8.2 per cent in the first quarter and 7.1 per cent in the second quarter.
Earlier this month, the Reserve Bank of India (RBI) cut its policy interest rate by 25 basis points to 6.25 per cent and changed its stance to ‘neutral’ to boost a slowing economy.
The sector which underperformed in the third quarter is the manufacturing sector despite becoming world sixth biggest auto manufacturer and increasing production in the smartphones category.
Currently, the manufacturing sector stands at 18 per cent with just 1.5 per cent growth in the last three years. Investors has blamed higher taxes, lack of infrastructure and regulatory red tape which make India a difficult place to manufacture.
As per RBI’s estimates which was released earlier this month, average industrial capacity utilisation during the four quarters that ended in September 2018 was about 74.5% although the new orders growth has moderated.