India's GDP grows 3.1% in January-March quarter, lowest in 11 years

New Delhi: The Indian economy grew by 3.1 percent in the January-March quarter of 2019-2020, data released by the government showed. The sharp slowdown in growth comes amid the spread of the COVID pandemic. This data also captures the last week of March when the nationwide lockdown was first imposed.

“Trajectory for our GDP was anyway on the downside as we were entering the COVID crisis… This quarter’s numbers become very relevant. Just 10 days of lockdown (in the quarter) has led to this number. If you cumulate that over a two month period, it is quite a shuddering number that we are possibly looking at for the next quarter,” Indranil Pan, Chief Economist at IDFC First Bank said.

The numbers are higher than the 2.2 percent GDP growth number CNBC-TV18’s poll had suggested. Data released by CSO showed that the GDP growth for the financial year 2019-2020 now stands at 4.2 percent, compared to a 6.1 percent growth in FY19. The full-year GDP growth figure factors in revisions to data for the past three quarters.

Growth for the first quarter of FY20 stands revised to 5.2 percent, compared to 5.6 percent estimated earlier. The second-quarter growth has been revised to 4.4 percent from 5.1 percent earlier, and growth for the third quarter revised to 4.1 percent from 4.7 percent earlier.

“This data release shows that previous quarters data was revised which usually never happens for the May end numbers,” added Anubhuti Sahay of Standard Chartered. “These numbers are not surprising given the headwinds India has been facing over the last 9-12 months. Going forward we will see a deeper contraction in GFCF (gross fixed capital formation)... India the pain is definitely ahead when we look at Q1 FY21 numbers.”

Nominal GDP growth fell to 7.2 percent in FY20 against 11 percent in FY19. The per capital income is now estimated at Rs 94,954 as of FY20 compared to Rs 92,085 in FY19, a 3.1 percent rise over the previous year.

Gross fixed capital formation, which is an indicator of the level of investments in the country saw the third consecutive quarter of contraction in Q4. Gross fixed capital formation contracted by 6.5 percent in Q4, after a 5.2 percent contraction in Q3. For the full year, it contracted by 2.8 percent, compared to a growth of 9.8 percent in the previous year.

Private consumption rose by 2.7 percent during the quarter compared to a 6.6 percent growth in Q3. The full-year private consumption growth fell sharply to 5.3 percent, against a 7.15 percent growth seen in FY19.

The agriculture sector grew by 5.9 percent in Q4, after growing by 3.6 percent in the third quarter, and grew 4 percent for the full year. Mining sector growth stood at 5.2 percent for the quarter and at 3.1 percent for the year. Manufacturing activity contracted by 1.4 percent in Q4 and grew by a meager 0.03 percent for the full year FY20.

The construction sector also contracted by 2.2 percent in the last quarter of FY20 and grew by 1.3 percent for the full year.

The financial services sector, however, grew by 2.4 percent in Q4 and by 4.6 percent in FY20. Trade, hotels, transport and communication growth came in at 2.6 percent in Q4 and at 3.6 percent for FY20.

“The story that played out in 2019-20 will play out in 2020-21 as well, but it is going to be much deeper. So agriculture will remain relatively strong, industry & services will sink, and the private consumption will obviously be weak, GFCF (gross fixed capital formation) will do down further. The only redeeming feature will be agriculture and government spending... These kickers to growth will not be enough to offset the decline in other segments of the economy,” said DK Joshi, Chief Economist at CRISIL Ratings.

Aditi Nayar of ICRA said, "the revised data for Q1-Q3 FY2020 reveals that the slowdown in growth was appreciably more pronounced than what the earlier data had indicated, especially in trade, hotels, transport, communications, etc and financial, insurance, real estate, and professional services."