Indian economy grew at its slowest pace in eight years at 3.1 per cent for the fourth quarter of Jan-March and at 11-year low of 4.2 per cent for the fiscal year 2019-20 (April-March) widening the fiscal deficit, as per the government data released on Friday evening.
The declining growth has widened the fiscal deficit by 80 basis points to 4.6 per cent against the target of 3.8 per cent leaving limited space to provide further economic relief to the beleaguered economy hit by the COVID-19 crisis, experts said.
Earlier, the Indian government had offered a stimulus package of 264 billion US dollar and the country's Central Bank cut policy rates by cumulative 115 basis points since the pandemic broke out.
In the preceding quarter of October-December, India had reported a growth of 4.7 per cent while for the previous fiscal year it stood at 6.1 per cent.
Asia's third largest economy has been under nationwide lock-down for close to eight weeks bringing the entire economy to a standstill. However, the full impact of the lock-down will only be felt in the April-June quarter as it was only made effective from March 25.
"Higher-than-expected growth in Q4 FY2020 should not be viewed with relief, as this data is constrained by the availability of earnings in many sectors, and is thus subject to considerable downward revision at a later stage in our view, especially for manufacturing and construction," said Aditi Nayar, Vice President and Principal Economist of ICRA - a credit rating agency.
The widening fiscal deficit is expected to contribute to a spike in G-sec yields, she said.
"The fact that Manufacturing sector has grown at 0 per cent for the whole of FY20 vs 5.7 per cent in previous year highlights the extent of issues in that sector and prompts faster and thorough measures to kickstart manufacturing given that the first two months of FY21 are washouts and job creation remains a top priority in the current times," said Dhiraj Relli, MD & CEO of HDFC Securities, a domestic stock brokerage house.
In view of the global COVID-19 pandemic and consequent nationwide lockdown measures implemented since March, 2020, the data flow from the economic entities has been impacted. As some of these units are yet to resume operations and owing to the fact that the statutory time-lines for submitting the requisite financial returns have been extended, the government statement said.