GDP Growth For This Year At 5%, Slowest In 11 Years

The government on Tuesday, January 7, forecasted India’s economy is expected to grow at 5%, an 11-year low, in the ongoing fiscal year. The slowdown has primarily been due to deceleration in both private consumption and investment.

According to the data released by the National Statistical Office (NSO), two key employment givers are experiencing a massive downfall, with growth in manufacturing seen slowing to a 15-year low and construction to a six-year low.

The slowdown was also witnessed in sectors like agriculture, construction and electricity, gas and water supply. Whereas, mining, public administration, and defence, experienced minor improvement.

The government estimated that Gross Value Added, which is Gross Domestic Product minus net taxes, will grow 4.9% in 2019-20. Per capita monthly income, however, is expected to rise by 6.8% to Rs 11,254 during 2019-20.

This data indicates major challenges for the Union Budget 2020-21 that will be presented on February 1.

“The slowdown in economic growth implies the government will have to come up with a fiscal stimulus in the budget,” NR Bhanumurthy, an economist at National Institute of Public Finance and Policy, a Delhi-based think-tank, told NDTV.

He said that these numbers would impact revenue estimates and government spendings for the next financial year. He added that following a steady recovery, growth was expected to be around 6-6.5 per cent in 2020-21.

Slipping GDP

The projected GDP growth rate in FY20 is the lowest since FY09, the year that suffered a global financial crisis when GDP stood at a mere 3.1%.

India’s growth rate has been slipping for five quarters now.

The GDP growth in FY19 was 6.8%. It has grown at 4.5% (July-September) and 5% (April-June) in the last two quarters.

Cut In Growth Projections

Last month, the Reserve Bank of India (RBI) had cut its projection for the economic growth rate to 5% for 2019-20, citing weak domestic and external demand as a cause for the falling projection.

In November, the output of eight core infrastructure industries fell 1.5%, marking the fourth straight month of a contraction as compared to November 2018.

The automobile sector also experienced a slowed down because of weakened consumer demand and a dearth of investments.

$5 Trillion Goal Unachievable?

Former RBI governor and former chairman of Prime Minister’s Economic Advisory Council C Rangarajan on December 5 said that India’s aim to become a $5 trillion economy by 2025 is not possible with the ongoing economic growth rate.

“Today, our GDP is close to $2.7 trillion. Therefore, reaching $5 trillion is almost close to doubling our GDP,” he said. “If you have to move from $2.7 trillion to $5 trillion economy, it will take seven years if the economy grows at 9% per annum and eight or nine years if it grows at 8% per annum.”

“If you have to move from $2.7 trillion to $5 trillion economy, it will take seven years if the economy grows at 9% per annum and eight or nine years if it grows at 8% per annum,” he added.

Also Read: ‘India’s Goal To Become $5 Trillion Economy By 2025 Is Impossible’: Former RBI Governor Rangarajan