The government expects the country’s gross domestic product (GDP) to grow at a slower pace of 5% for the full year 2019-20, as compared to 6.8% in the previous year, according to the first advance estimates released by the Statistics Ministry on Tuesday.
This estimate is in line with projections made by the Reserve Bank of India, which had revised GDP growth downwards to 5% for 2019-20 from 6.1% during its October policy.
As per the data, the manufacturing sector is estimated to grow by 2% as compared to a robust growth of 6.9% in 2018-19. Likewise, the growth in the construction sector for the fiscal is expected to see a sharp decline to 3.2% as against a growth of 8.7% in the previous year.
Economic growth slowed to a six-year low of 5% in the first quarter of the 2019-20 fiscal, while slipping further to 4.5% growth in the second quarter (July-September).
The advanced estimates also forecast slower rate of growth for real Gross Value Added (GVA) at 4.9% as against 6.6% in 2018-19.
Experts, however, feel that it may be difficult to achieve the projected 5% growth given the rising oil prices and expected decline in government expenditure.
“The achievement of the annual 5% growth will be challenging given the global tensions, rising oil prices and expectation of a deceleration in government expenditures given stress on the revenue front. These factors will limit the growth rates in Q4 too,” Ranen Banerjee, Leader- Public Finance and Economics, PwC India said.
As per the advance estimates, agriculture, forestry and fishing sector will grow by 2.8% almost at the same pace as in 2018-19 when it grew by 2.9%, while ‘Electricity, Gas, Water Supply and Other Utility Services’ sector is expected to grow by 5.4% as compared to a growth of 7% in 2018-19.
“The key news in the first advanced estimates...is the fall in the nominal GDP growth to 7.5% in FY20 as compared to the previous peak of 13.8% in FY13. This fall translates into a fall in tax revenues and an increase in the fiscal deficit which are both detrimental to growth,” DK Srivastava, Chief Policy Advisor at EY India told The Hindu.
He further added that crude prices are expected to go up further, which will put pressure on the fiscal deficit. It “could be difficult for the government to tackle and may lead to strengthening of the slowdown in growth in the economy,” Mr Srivastava said.