With manufacturing expected to come down to 2%, GDP to grow at 5% this fiscal, says govt data; slowest pace in 11 years

  • The decline has been mainly on account of deceleration in manufacturing sector growth, which is expected to come down to 2 percent in 2019-20 from 6.2 percent in the year-ago fiscal

  • The deceleration was also witnessed in sectors like agriculture, construction and electricity, gas and water supply, s per the first advanced estimates of the national income released by National Statistical Office (NSO) on Tuesday

  • Data so far this year points to a weaker-than-expected activity, with global trade tensions and rising crude oil prices posing risks

The economy is estimated to grow at 5 percent growth for the current financial year, the slowest pace in 11 years, as against 6.8 percent in the previous fiscal which will likely prompt the finance minister to opt for extra fiscal stimulus when she presents the annual Budget next month, according to a Reuters report.

The decline has been mainly on account of deceleration in manufacturing sector growth, which is expected to come down to 2 percent in 2019-20 from 6.2 percent in the year-ago fiscal, as per the first advanced estimates of the national income released by National Statistical Office (NSO) on Tuesday, according to a PTI report.

 With manufacturing expected to come down to 2%, GDP to grow at 5% this fiscal, says govt data; slowest pace in 11 years

Representational image. Reuters.

The deceleration was also witnessed in sectors like agriculture, construction and electricity, gas and water supply. Whereas, some sectors, including mining, public administration, and defence, showed minor improvement.

The government is expected to announce tax concessions for individuals and increase spending on infrastructure after cutting corporate tax rates last year, officials and economists said.

Finance Minister Nirmala Sitharaman last week unveiled a plan to invest 102 trillion rupees ($1.4 trillion) in infrastructure over the next five years in a bid to make India a $5 trillion economy by 2025.

Annual economic growth slowed to 4.5 percent in the July-September quarter, the weakest pace since 2013, blamed on weakening demand and private investment, putting pressure on Prime Minister Narendra Modi to speed up reforms as five rate cuts have failed to help. The financial year ends in March.

GDP Growth_HOW DIFFERENT SECTORS PERFORMED (1)

Gross domestic product is estimated to grow 5.0 percent in 2019/20, slower than the 6.8 percent growth of 2018-19, the Ministry of Statistics said in a statement.

Indian growth had slowed to 3.1 percent in 2008-09 after the global financial crisis.

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

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

Manufacturing is forecast to grow 2.0 percent in 2019-20, compared to 6.9 percent growth in 2018-19, the Ministry of Statistics said.

Construction is likely to grow 3.2 percent in 2019-20, compared to 8.7 percent the previous year, while the farm sector is forecast to grow 2.8 percent, compared to 2.9 percent a year earlier, the statement said.

Private economists expect growth to steadily pick up in the next fiscal year. Data so far this year points to a weaker-than-expected activity, with global trade tensions and rising crude oil prices posing risks.

The unemployment rate rose to 7.7 percent in December from 7 percent a year earlier, data released by the Centre for Monitoring Indian Economy, a Mumbai-based think tank, showed.

The statistics ministry will release growth data for the October-December quarter on 28 February, along with revised full-year growth estimates.

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Updated Date: Jan 08, 2020 15:47:13 IST