The GDP of India is expected to grow at 6-6.5% in 2020-21 as per the Economic Survey that was tabled by Finance Minister Nirmala Sitharaman on Thursday, one day ahead of the budget. For the fiscal year 2019-20, which will end on March 31, 2020, the government has estimated the GDP growth at 5%, suggesting an uptick in the second half of the fiscal.
The Survey says that fiscal deficit target for the current fiscal may need to be relaxed to revive growth. It also suggests that the government must deliver expeditiously on reforms to revive growth.
While addressing the media, when asked a question on why the government is confident of an uptick, CEA KV Subramanian said that steps taken by the government will help boost growth.
“There are some early signs. The business cycle phenomena in India has peaks and troughs. It seems like we hit a trough and we should see an uptake now,” he added.
The Survey also states that the economy is poised for a rebound towards the $5 trillion goal by 2024-25. And to achieve this, India needs to spend about USD 1.4 trillion over these years on infrastructure.
The Survey states that the uptick in second half of 2019-20 would be mainly due to ten positive factors like picking up of NIFTY for the first time this year, an upbeat secondary market, higher FDI flows, build-up of demand pressure, positive outlook for rural consumption, rebound of industrial activity, steady improvement in manufacturing, growth in merchandise exports, higher build-up of foreign exchange reserves and positive growth rate of GST revenue collection.
The survey blames the slowdown in the Indian economy on weak environment for global manufacturing, trade and demand. “A sharp decline in real fixed investment induced by a sluggish growth of real consumption has weighed down GDP growth from second half of 2018-19 to first half of 2019-20,” the government said in a statement.
The Survey states that GDP growth was dragged down in the second half of FY19 to first half of FY20 due to a decline in real fixed investment induced by a sluggish growth of real consumption.
However, the government claims that real consumption growth has recovered in the second quarter of FY20.
Speaking of inflation, the Survey says that it rose to 7.4% in December 2019 due to temporary increase in food inflation. It expects that to decline by year-end.
“The food prices spiked following unseasonable rainfall and a flood-like situation in many parts of the country, which affected agricultural crop production. The Wholesale Price Index (WPI) inflation, on the other hand, declined sharply from 3.2 per cent in April 2019 to 2.6 per cent in December 2019, reflecting weakening of demand pressure in the economy,” the survey says.
Other highlights include:
- Share of formal employment increased from 17.9 per cent in 2011 -12 to 22.8 per cent in 2017-18 reflecting formalisation in the economy
- 2.62 crore new jobs created in rural, urban areas between 2011-12 and 2017-18 among regular wage /salaried employees
- 8 per cent increase in regular employment of women in 2017-18 over 2011-12
- Suggests government to systematically examine areas where it needlessly intervenes and undermines markets
- Calls for improving governance in public sector banks, more disclosures to build trust
- Calls for measures to make it easier to start new business, register property, pay taxes, enforce contracts
- Easing of crude prices lowers current account deficit; imports contract more sharply than exports in first half of current fiscal
- GST collections grew by 4.1 per cent for the Centre during April-November 2019.
(With PTI inputs)