Economy

India's Economy Expected to Grow at Over Ten-Year-Low in FY'20

The newest growth projection of 5% is the latest acknowledgement that Indian economic activity has cooled this fiscal year on the back of reduced private investment and depressed consumer spending.

New Delhi: India’s GDP is expected to grow at just 5% in FY’20, according to the ‘first advance estimates’ released by the Central Statistics Office (CSO) on Tuesday evening.

The newest growth projection is the latest acknowledgement that Indian economic activity has cooled this fiscal year on the back of reduced private investment and depressed consumer spending.

Gross domestic product grew by 6.8% in FY’19.

Other organisations like the Reserve Bank of India have already cut their projections in light of the economic slowdown. The central bank, for instance, slashed its earlier GDP estimate of 6.1% and now also projects growth to be 5% for the financial year.

Also read: GDP Data: Investment Growth at 19-Quarter Low Despite Modi Govt’s Stimulus Measures

According to CSO data, India’s GVA (gross value-added) is expected to grow 4.9%, while nominal GDP may grow by 7.5%.

The statistics ministry’s ‘first advance estimates’ take into account the figures available for the first nine months of the current fiscal. GDP growth stood at 4.8% for the first half of the current fiscal year – this indicates that the government feels it is unlikely that the Q3 and Q4 of FY’20 are likely to see a V-shaped recovery.

Moreover, first advance estimates may also be inaccurate as the table below shows.

If the 5% growth projection for FY’20 holds, this would mean that the Indian economy is growing at its slowest pace since 2008-2009.

Table1: GDP Growth in % Year-on-Year

Financial Year

First Advance Estimates

Actual Number

2011-2012

6.9

6.5

2012-2013

5.0

5.0

2013-2014

4.9

4.7

2014-2015

7.4

7.3

2015-2016

7.6

7.6

2016-2017

7.1

7.1

2017-2018

6.1

6.6

2018-2019

7.2

6.8

2019-2020

5 ?

(Source: Ministry of Statistics and Programme Implementation. Note:  i) Data till 2013-2014 is on base year of 2004, and later years on base year of 2011-2012.   ii) In the last few years, since the budget has been shifted to February 1, the statistics ministry has also come out with a second advance estimates which is often more accurate.)  

For example, in the last financial year (FY’19), the first advance estimates had pegged the GDP growth at 7.2%, which was brought down to 7% in the second advance estimates and was further pared down to 6.8% when the final number was recorded.

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

Bhanumurthy said latest growth numbers would impact revenue estimates and government spending for the next financial year. Growth was likely to be around 6-6.5% in 2020/21, he said, following a steady a recovery.

Indeed, news broke on Tuesday that the Centre is likely to curtail spending by up to Rs 2 lakh crore in the upcoming Budget, a development that will have consequences for growth.

(With inputs from Agencies)