The National Statistical Office (NSO) has released its first advance GDP estimates for fiscal 2019-20 on Tuesday, January 7, indicating a 5 per cent growth in the economy.
Yes, this will be the lowest growth rate since 2008-09 (FY09), the year of the global financial crisis. Therefore, raising more concerns for an economy already facing a slowdown.
The economic forecast suggests a 5 per cent rise in the second half of the fiscal, a slight recovery against 4.8 per cent in the first half.
Noting, the 5 per cent growth is in line with the RBI’s December policy, sliding the bar downwards from its 6.1 per cent growth prediction in its October policy.
But before that, here’s a quick comparison with the last year’s growth
The real Gross Value Added (GVA) is expected to grow by 4.9 per cent against 6.6 per cent growth in 2018-19. The manufacturing sector, which is expecting a 2 per cent growth in 2019-20, slowest pace of growth in 11 years, rose 6.9 per cent last year. Agricultural sector, which employs more than half of the country’s population, is expected to grow at 2.8 per cent as compared to 2.9 per cent in the previous year.
And, Gross Fixed Capital Formation (GFCF) at current prices is estimated at Rs 57.42 trillion in 2019 compared to Rs 55.70 trillion in 2018-19
So what does this mean?
This means, industrial activity and investment has declined significantly, thereby increasing uncertainty regarding economic growth and jobs, especially in FY21.
In nominal terms, India’s gross domestic product (GDP) is expected to grow at 7.5 per cent, a multi-decade low, suggesting that tax revenues and individual incomes may remain under stress.
So, what’s the government’s take on it?
As a matter of fact, the government has already announced several measures including a sharp cut in corporation tax rate, support for stalled housing projects and Rs 102 trillion plan for infrastructure, which however failed to quench the expert’s appetite, asking for more in the upcoming budget.
Besides, from October-March FY20, private consumer spending is projected to grow at 7.3 per cent, faster than the disappointing 4 per cent in the first half. However, the pace of government spending is set to weaken to 8.5 per cent.
Annually, while the former will grow at 5.8 per cent, growth in the latter is expected to be 10.5 per cent. While this indicates that measures taken after the Union Budget to boost consumption are taking shape, experts discounted this projection, especially for consumption.
Sunil Kumar Sinha, principal economist at India Ratings, said the private consumer spending estimates are not sacrosanct. “The assumption relating to private consumption looks unrealistic if festival demand is taken as an indicator,” he said.
Besides, Banking on a healthy rabi output, economists expect rural sentiment to improve around March. Aditi Nayar, principal economist at ICRA said, “A small turnaround could be underway, as good farm output from the rabi season would boost rural sentiment. Further, the decline in electricity consumption is getting arrested, goods and services tax revenues...
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