India needs to revive economy to be on track for a US$5t GDP

THE re-election of the Narendra Modi-led National Democratic Alliance (NDA) in May was expected to be a big boost to India's growth story. He had announced in one of his first post-election speeches that his government's target was to hit US$5 trillion in gross domestic product (GDP) by 2024. The GDP is now a shade under US$3 trillion.

Fast forward one quarter. There has been a dramatic change in both the economic sentiment as well as the numbers. GDP growth plummeted to 5 per cent in the April-to-June quarter, the lowest in 25 quarters. In the year-ago quarter, growth was 8 per cent.

Manufacturing activity slumped to a 15-month low in August, with factories cutting back on production. The manufacturing Purchasing Managers' Index (PMI) fell to 51 from 52.5 in July, the lowest since May 2018 and below the long-run average of 53.9. The automobile sector - a key generator of jobs - was badly hit; car sales crashed 29 per cent last month. While some of the problems can be attributed to the court-mandated changeover to a higher emission-control standard, the fact remains that customers are buying fewer vehicles. General manufacturing, agriculture, FMCG (fast-moving consumer goods), real estate and construction sectors have also slumped badly.