Economy Appears To Have Slowed Down, Says Finance Ministry

India's economy appears to have slowed down slightly in 2018-19, the department of economic affairs under the Ministry of Finance has said in its monthly economic report for March 2019. The factors responsible for this slowdown include declining growth of private consumption, tepid increase in fixed investment, and muted exports, the report says.

On the supply side, the challenge is to reverse the slowdown in growth of agriculture sector and sustain the growth in industry. On the external front, current account deficit as ratio to GDP is set to fall in Q4 of 2018-19, which will limit the leakage of growth impulse from the economy, the report said.

The gross domestic product (GDP) growth for last quarter of financial year 2018-19 is expected to be around 6.5 per cent while the GDP growth for FY19 is seen at 7 per cent while fiscal deficit as a percentage of GDP has steadily declined and is expected to be 3.4 per cent, the report noted.

Current account deficit as per cent of GDP improved in third quarter and is set to improve further in fourth quarter of 2018-19 as dip in imports has improved the merchandize trade deficit, the Finance Ministry said.

Monetary policy has attempted to provide a fillip to the growth via cuts in repo rate and easing of bank liquidity. However, the room for this monetary easing has been created by low inflation in 2018-19, although it has started to inch up in last few months of the year, the report said.

The real effective exchange rate has appreciated in Q4 of 2018-19 and could pose challenges to the revival of exports in the near future. Increase in foreign exchange reserves in last quarter of 2018-19 on account of improvement in trade balance has increased the import cover for the economy, the report added.