EXPERT ANALYSES- AT 5%, GDP TO GROW AT THE SLOWEST IN MORE THAN A DECADE
News behind the News|NbN 13 January 2020
Ahead of the Union Budget for 2020-21, Prime Minister Narendra Modi, Thursday met economists and sector experts to discuss the state of the economy and steps which can be taken to revive growth which is projected to drop to 5 per cent this fiscal.

The meeting assumes significance as the Central Statistics Office has projected the economy’s growth rate for 2019-20 at 5 per cent, the lowest in the current series with 2011-12 as the base year. This first advance estimate is much lower than the 7 per cent growth rate projected in the Economic Survey as also the average forecast of 5.5 per cent by major agencies, but on a par with RBI’s latest estimate of 5 per cent.

At the aggregate level, growth in gross value added (GVA) is expected to fall to 4.9 per cent in FY20, down from 6.6 per cent in FY19. Government spending is expected to drive growth this year. Excluding public administration, defence and other services, which largely connotes government spending, gross value added by the rest of the economy is projected to grow by an even lower 4.3 per cent this year. But with government revenues coming under pressure, the Indian Express writes “it is debatable whether this higher government spending can be maintained over the second half of this year. The NSO expects government spending to grow at 13.7 per cent (current prices). How it manages this conundrum in the face of pressure to stick to the fiscal deficit target will be clear when it presents the budget in a few weeks from now.”

Manufacturing activity is expected to slow down to a mere 2 per cent in FY20, from 6.9 per cent in FY19. A similar slowdown is expected in the construction sector, trade, hotels, transport and communication as well as the financial, real estate, and professional services sector. Household demand is also expected to moderate to 5.8 per cent this fiscal, down from 8.1 per cent in the previous year, while investment activity is expected to remain almost flat, growing at a mere 1 per cent this year, down from 10 per cent in the previous year.

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