Why the economy needed this fourth booster dose

Over the past few months, industry bodies have been demanding a stimulus package. The Q1 GDP growth fell below everybody’s expectations — including RBI’s. Many sectors, including FMCG and automobiles, are reeling under slowing demand. TOI analysed the numbers to understand why the manufacturing sector needed this push.
Slow economic growth
Since the first quarter of 2018-19, the growth rate of Gross Value Added (GVA) to the Indian economy has slowed down.In the previous four quarters, it was steadily increasing. GVA (value of goods and services produced in a country minus all input costs) is a close proxy for GDP.

Manufacturing has slumped
In the past two years, the growth rate of GVA by services has largely remained steady. But the growth rate of GVA in agriculture and Industries — comprise 43.6% of the economy — is on the decline .


Core sectors and industries slow down
In the first quarter of 2018-19, the manufacturing sector registered a year-on-year growth of 12.1%. Since then, growth has slowed, reaching 0.6% for Q1, 2019-20. Some industry sectors are growing faster but their share in GVA is a little over 5%. Construction, another major contributor to GVA by industry, is also growing slower than before


Trade imbalance on the rise
Data shows that more than 31% of India’s foreign currency earnings are from goods exports, largely linked to manufacturing. About half of the foreign currency spent is for importing goods. Because of slow growth in the manufacturing sector, this trade imbalance has increased, a major factor in the Indian currency falling.