NSO confirms economic slowdown fears; pressure on govt to step up spending

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The rupee faces an uncertain future as it grapples with economic challenges and global headwinds.

The slowdown-hit Indian economy will grow 5% in the current financial year, compared with 6.8% in the last fiscal, according to the first advance estimates released on Tuesday by the National Statistical Office. The per capita income of Indians is expected to reach Rs 96,563 this year, compared with Rs 92,565 in 2018-19. The per capita income is seen growing 4.3% in 2019-20, as against 5.6% last year. GDP at current prices is likely to reach Rs 204.42 lakh crore, compared with Rs 190.10 lakh crore in 2018-19, growing at a rate of 7.5%.

The Reserve Bank had scaled down its GDP growth forecast to 5% in its bimonthly monetary policy statement in December. The country is facing an economic slowdown triggered by slowing demand and lack of private sector investment. The economy expanded 4.5% in the second quarter of the fiscal, which followed a dismal 5% growth in the first quarter ended June 2019.

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The slowdown will put immense pressure on finance minister Nirmala Sitharaman and the top brass at the finance ministry to step up public spending to shore up growth. The finance minister had set a fiscal deficit target of 3.3% of the gross domestic product in her maiden budget in July 2019. But measures announced to tackle the slowdown, including the cuts in corporate tax, are likely to push the deficit figure beyond 4%. If extra-budgetary borrowings are added to the fiscal deficit of the Centre and state governments, the actual figure would be close to 10% of the GDP. This may reduce the government’s ability to step up public spending despite an accelerated public sector disinvestment programme.

The real GDP, which is not adjusted to inflation, is expected to reach Rs 147.79 lakh crore, compared with. The real GDP is seen growing at 5% in the current fiscal compared with 6.8% in 2018-19.

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The gross value added in manufacturing sector is expected to grow 2% in 2019-20, compared with 6.9% last year. GVA in agriculture, forestry and fishing is seen growing at 2.8% in 2019-20 compared with 2.9% in 2018-19. Crops including fruits and vegetables have a weight of 56% in this segment, while livestock products have 30% and forestry & fisheries 14%. GVA in mining and quarrying is expected to expand 1.5% compared to 1.3% in 2018-19.

The private final consumption expenditure at current prices is put at Rs 123.07 lakh crore in 2019-20 compared with Rs 112.90 lakh crore last year. The PFCE at 2011-12 prices is expected at Rs 84.81 lakh crore in 2019-20 compared with Rs 80.17 lakh crore in 2018-19. Gross fixed capital formation is projected to be Rs 57.42 lakh crore at current prices compared with Rs 55.70 lakh crore last year. At 2011-12 prices, the GFCF is seen at Rs 45.93 lakh crore in 2019-20 compared with Rs 45.48 lakh crore last year.