Govt pegs GDP growth at 5 per cent for current fiscal

New Delhi: India’s economic growth for the current fiscal is pegged at 5 per cent, down from 6.8 per cent in year-ago period. The latest data released by the Central Statistics Office (CSO), on Tuesday, forecast 5 per cent growth in gross domestic product (GDP) in 2019-20, much in line with the Reserve Bank’s estimate of 5 per cent in December, but the lowest since 2008-09 when growth slowed to 3.1 per cent following the global financial crisis.

GDP growth stood at 4.8 per cent for the first half of the current fiscal year.

The first advance estimate of FY20 gross value added (GVA) growth is estimated at 4.9 per cent against 6.6 per cent in 2018-19. The manufacturing sector is expected to grow at 2 per cent in 2019-20 compared to 6.9 per cent in the previous year.

The advance estimates are based on the growth numbers of the first two quarters and other high frequency data. Growth had slowed to over a six-year low of 5 per cent in the first quarter while it further slipped to 4.5 per cent in the second quarter.

As per the data, the economy’s deceleration was mostly witnessed in sectors like agriculture, construction & electricity, gas & water supply while some sector like mining, public administration and defence showed minor improvement.

“The real GDP at constant prices (2011-12) in FY20 is likely to attain a level of Rs 147.79 lakh crore as against the provisional estimate of GDP for the year FY19 of Rs 140.78 lakh crore,” CSO said.

The first advance estimate data is generally released one month ahead of the Union budget, which will be presented on February 1, while the actual data for three quarters, or the second advance estimates for third quarter, is expected to be released on February 28. This would give a better picture of the health of economy.

India needs to grow at around 8 per cent a year to create enough jobs for the millions of young people joining the labour force each year.

The per capita income in real terms (at 2011-12 prices) during 2019-20 is likely to attain a level of Rs 96,563 compared to Rs 92,565 in the year 2018-19. “The growth rate in per capita income is estimated at 4.3 per cent during 2019-20 against 5.6 per cent in the previous year. The gross fixed capital formation at current prices is estimated at Rs 57.42 lakh crore in 2019-20 against Rs 55.70 lakh crore in 2018-19.

However, economists aren’t sure of the growth projections. “With FY20 real GDP growth at 5 per cent, CSO expects personal consumption growth to pick up from 4.1 per cent in 1HFY20 to 7.3 per cent in 2HFY20, which certainly seems optimistic to us,” said Nikhil Gupta, chief economist, Motilal Oswal Financial Services.

“Surprisingly it also expects government consumption to continue to grow strongly at 8.5 per cent in 2HFY20, which seems to be a challenging one, considering the massive receipt shortfall,” said Gupta.