Suggesting an uptick in GDP growth in the second half of 2019-20, the government on Friday said that based on first Advance Estimates, India’s GDP growth would be 5 per cent for the current fiscal. The Economic Survey 2019-20, tabled in the Parliament on Friday by Finance Minister Nirmala Sitharaman, also projected that India’s GDP was expected to grow in the range of 6 to 6.5 per cent in FY21.
The Survey said that the uptick in second half of 2019-20 would be mainly due to ten positive factors like picking up of NIFTY for the first time this year, an upbeat secondary market, higher FDI flows, build-up of demand pressure, positive outlook for rural consumption, rebound of industrial activity, steady improvement in manufacturing, growth in merchandise exports, higher build-up of foreign exchange reserves and positive growth rate of GST revenue collection.
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It added that the current deceleration in GDP growth could be understood within the framework of a slowing cycle of growth with the financial sector acting as a drag on the real sector.
To achieve the projected growth of 6 to 6.5 per cent in the next fiscal, the Survey asked the government "to use its strong mandate to deliver expeditiously on reforms for the economy to strongly rebound in 2020-21".
The Survey pointed out that the year 2019 was a difficult year for the global economy with world output growth estimated to grow at its slowest pace of 2.9 per cent since the global financial crisis of 2009, declining from a subdued 3.6 per cent in 2018 and 3.8 per cent in 2017.
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"Uncertainties, although declining, are still elevated due to protectionist tendencies of China and USA and rising USA-Iran geo-political tensions. Amidst a weak environment for global manufacturing, trade and demand, the Indian economy slowed down with GDP growth moderating to 4.8 per cent in first half of 2019-20, lower than 6.2 per cent in second half of 2018-19. A sharp decline in real fixed investment induced by a sluggish growth of real consumption has weighed down GDP growth from second half of 2018-19 to first half of 2019-20," it said
However, it added that the real consumption growth recovered in Q2 of 2019-20, cushioned by a significant growth in government final consumption.
"At the same time, India’s external sector gained further stability in first half of 2019-20, with a narrowing of Current Account Deficit (CAD) as percentage of GDP from 2.1 in 2018-19 to 1.5 in first half of 2019-20, impressive Foreign Direct Investment (FDI), rebounding of portfolio flows and accretion of foreign exchange reserves," the Survey document said.
It added that given India’s record of growth with macroeconomic stability over the last five years, with annual average growth rate of 7.5 per cent, the economy was poised for a rebound towards the $5 trillion goal by 2024-25.
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