INSUBCONTINENT EXCLUSIVE:
Mumbai: There may not be much the government can do to fightback the severe slowdown facing the economy because the fiscal space to do so is
limited after the corporate tax rate cut and GST shortfall, Kotak said in a report on Saturday.National Statistical Office (NSO) data showed
that India's GDP growth slipped to a six-year low of 4.5 per cent in second quarter owing to sharp decline in manufacturing activity, which
contracted by 1 per cent.Finance Minister Nirmala Sitharaman tweeted on Saturday that the interventions addressing the needs of the economy
will continue.While favourable base effects, increased pace of government spending, lower short-term rates due to lower policy rates and
easier liquidity conditions could provide some support to growth in second half of financial year 2020, we see limited room for a meaningful
revival in activity in the months ahead, the report said."The government's fiscal space to support economic activity is limited after the
corporate tax rate cuts and GST shortfall," the report said.Kotak said that high frequency data for October and November suggested that
economic activity weakened further despite festive season demand, revising down its FY2020 GDP estimate by 30 bps to 4.7 per cent."On the
policy front, we expect the MPC to look through the impact of higher food prices after a dismal 1HFY20 growth and take cues from the
moderating core inflation
The MPC will have to revise down the FY2020 GDP estimate from 6.1 per cent while revising higher the near-term CPI inflation trajectory,"
Kotak said.Consistent with the meltdown witnessed in the high frequency indicators, real GDP growth moderated sharply to 4.5 per cent and
nominal GDP growth slowed to 6.1 per cent from 8 per cent in Q1FY20, exacerbating the state of the government finances, Kotak said.Real
gross value added (GVA) growth softened to 4.3 per cent in Q2 due to lower industrial growth of 0.5 per cent
Within the industry, manufacturing growth slumped to (-)1 per cent in Q2 from 0.6 per cent in Q1, consistent with the downtrend witnessed in
IIP data.In sync with the distress in real estate, construction growth slowed to 3.3 per cent in Q2 (5.7 per cent in 1QFY20)
Electricity and mining segment growth slowed to 3.6 per cent and 0.1 per cent, respectively, in Q2
Services sector growth moderated marginally to 6.8 per cent in Q2.(This story has not been edited by TheIndianSubcontinent staff and is
auto-generated from a syndicated feed.)
