GDP to grow at 7% in 2019-20 due to growth of investment & consumption : Survey

Speed Post News Network

New Delhi : The Government has projected the real GDP growth for the year 2019-20 at 7 per cent on the back of anticipated pickup in the growth of investment and acceleration in the growth of consumption.

Union Finance and Corporate Affairs Minister Nirmala Sitharaman tabled the Economic Survey 2018-19 in Parliament on July 4, 2019, which clearly stated that the year 2019-20 has delivered a huge political mandate for the government, which augurs well for the prospects of high economic growth. The April, 2019 Report of the World Economic Outlook (WEO) of International Monetary Fund (IMF) has projected India’s GDP to grow even higher at 7.3 percent in 2019. This is despite the Report projecting a decline in growth of world output and that of Emerging Market and Developing Economies (EMDEs) by 0.3 and 0.1 percentage points respectively.

India continues to remain the fastest growing major economy in the world in 2018-19, despite a slight moderation in its GDP growth from 7.2 per cent in 2017-18 to 6.8 per cent in 2018-19. On the other hand, the world output growth declined from 3.8 per cent in 2017 to 3.6 per cent in 2018. The slowdown in the world economy and Emerging Market and Developing Economies (EMDEs) in 2018 followed the escalation of US China trade tensions, tighter credit policies in China, and financial tightening alongside the normalization of monetary policy in the larger advanced economies, according to a PIB release.

India’s growth of real GDP has been high with average growth of 7.5 per cent in the last 5 years (2014-15 onwards). The Indian economy grew at 6.8 per cent in 2018-19, thereby experiencing some moderation in growth when compared to the previous year. This moderation in growth momentum is mainly on account of lower growth in ‘Agriculture & allied’, ‘Trade, hotel, transport, storage, communication and services related to broadcasting’ and ‘Public administration & defence’ sectors.

Acreage in 2018-19 for the rabi crop was marginally lower than last year, which affected agricultural performance. The contraction in food prices may have contributed to inducing farmers to produce less. On the demand side, lower growth of GDP in 2018-19 was accounted for, by a decline in growth of government final consumption, change in stocks and contraction  in valuables.

On the external front, current account deficit (CAD) increased from 1.9 per cent of GDP in 2017-18 to 2.6 per cent in April-December 2018 . The widening of the CAD was largely on account of a higher trade deficit driven by rise in international crude oil prices (Indian basket). The trade deficit increased from US$ 162.1 billion in 2017-18 to US$ 184 billion 2018-19. Merchandise imports reduced from 21.1 per cent to 10.4 per cent. Growth in service exports and imports in US dollar terms declined to 5.5 per cent and 6.7 per cent respectively in 2018-19, from 18.8 per cent and 22.6 per cent respectively in 2017-18.

Rupee depreciated by 7.8 per cent vis-à-vis UD dollar, 7.7 per cent against Yen, and 6.8 per cent against Euro and Pound Sterling in 2018-19. During 2018-19, Indian rupee traded with a depreciating trend against UD dollar and touched Rs. 74.4 per US dollar in October 2018 before recovering to Rs. 69.2 per US dollar at end March 2019.

The foreign exchange reserves in nominal terms (including the valuation effects) decreased by US$ 11.6 billion end-March 2019 over end-March 2018. Within the year, foreign exchange reserves were declining until October 2018 due to RBI’s intervention to modulate exchange rate volatility. India’s foreign exchange reserves continue to be comfortably placed at US $ 422.2 billion, as on June 14, 2019.

Net Foreign Direct Investment (FDI) inflows grew by 14.2 per cent in 2018-19. Among the top sectors attracting FDI equity inflows, services, automobiles and chemicals were the major categories.  The increase in Non-Performing Assets (NPA) of banks led to stress on balance sheets of banks, with the Public Sector Banks (PSBs) taking in more stress.

Real growth in ‘Agriculture & allied’ sector was lower in 2018-19 at 2.9 per cent, after two years of good agriculture growth. As per the 3^rd Advance Estimates released by Ministry of Agriculture & Farmers Welfare, the total production of  foodgrains during 2018-19 is estimated at 283.4 million tones in 2017-18 (final estimate). Growth in the industry accelerated during 2018-19 on the strength of improving manufacturing and construction activity.