The economic growth slowed to a seven-year low of 5 per cent in April to June quarter from 8 per cent a year ago, government data showed on Friday. The slowdown was largely due to a sharp dip in the manufacturing sector and agriculture output, said the Ministry of Statistics and Programme Implementation in a statement

The previous low was recorded at 4.9 per cent in April to June 2012-13. Consumer demand and private investment have weakened amid global trade frictions and dampening business sentiment.

The manufacturing sector grew by 0.6 per cent as compared to a growth of 12.1 per cent in Q1 2018-19. Agriculture, forestry and fishing' sector grew by 2 per cent as compared to growth of 5.1 per cent in Q1 2018-19.

On the other hand, mining and quarrying sector grew by 2.7 per cent as compared to a growth of 0.4 per cent in the corresponding quarter of previous fiscal. Electricity, gas, water supply and other utility services sector grew by 8.6 per cent as compared to growth of 6.7 per cent in Q1 2018-19.

While Congress targeted the BJP over the state of the economy, BJP Rajya Sabha MP Subramanian Swamy also joined in saying: “Get ready to say good bye to ₹ 5 trillion if no new economic policy is forthcoming. Neither boldness alone or knowledge alone can save the economy from a crash. It needs both. Today we have neither.”

Cong Slams Govt

Congress leader Randeep Singh Surjewala stressed that there is a complete economic downturn, virtual shutting down of manufacturing, lagging exports and surging imports, besides the loss of millions of jobs in all sectors, Congress leader Randeep Surjewala said financial mismanagement and a "spate of economic emergency prevails and pervades the entire economy".

He said that the "dismal and disappointing" Gross domestic product (GDP) data only reflects it, adding that the malady is much bigger than what it appears to be.

"The myopic BJP government is pre-occupied in shoddy headline management and cover-up job, instead of addressing the structural issues ailing the economy. This is a classic case of quacks turning into surgeons!," Surjewala said in a tweet.

Congress media chief Surjewala's response comes after the government announced a merger of 10 public sector banks (PSBs) into four strong lenders with countrywide networks and global reach to boost credit and revive economic growth in the nation's bid to become a five trillion dollar economy in the next five years.

Banks Merged

Canara Bank and Syndicate Bank will be merged to become fourth-largest PSB with a business of Rs 15.2 lakh crore. Union Bank of India, Andhra Bank and Corporation Bank will become fifth largest PSB while Indian Bank will merge with Allahabad Bank to become seventh-largest PSB with the business of Rs 8.08 lakh crore.

Bank of India and Central Bank of India will continue as individual entities. Indian Overseas Bank, UCO Bank, Bank of Maharashtra and Punjab and Sindh Bank will also continue to operate on their own.

"These big banks will have enhanced capacity to increase credit and bigger risk appetite, with a national presence and global reach," said Sitharaman. Nearly 88 per cent of all PSB business will be with these consolidated banks.

Not Just Capital But Good Governance

The government's intention is not just to give capital but also give good governance. There is no government interference in commercial decisions of banks, said the Finance Minister adding that no retrenchment has taken place post the merger of Bank of Baroda, Dena Bank and Vijaya Bank. The staff has been redeployed and best practices in each bank have been replicated in others.

"Gross non-performing assets have come down from Rs 8.65 lakh crore to Rs 7.9 lakh crore," she said. "Special agencies have been formed to monitor loans above Rs 250 crore to avoid a Nirav Modi like situation."

Four non-banking finance companies (NBFC) have already found liquidity solution through a settlement with banks, said Sitharaman.

Need To Lay Strong Foundation For Financial Sector

All PSU banks will now have a non-executive chairman, a position earlier existed only in State Bank of India (SBI), India's largest lender. The PSBs will have to appoint a Chief Risk Officer, who will be provided market-level compensation. Longer terms will be given to directors on management committees to ensure continuity.

The Finance Minister said in the 2.6 trillion dollar Indian economy, credit availability currently stands at $1.9 trillion, or nearly 72 per cent of GDP. She said the government is committed to improving credit flow and eight PSBs have already launched repo-linked loans since her booster measures for the economy last Friday.

"We need to lay a strong foundation for the financial sector," said Sitharaman. "About 3.38 lakh shell companies have been closed. The resolutions for stressed assets are happening through the Insolvency and Bankruptcy Code."