CSO’s first advance estimate projects all three sectors growing at lower rate; industry worst hit
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 projection is a 11-year low
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.
The government estimated that the gross value added (GVA) — a more realistic guide to measure changes in the aggregate value of goods and services produced — will grow at 4.9 per cent in 2019-20.
All the three sectors of the economy — agriculture, industry and services — are projected to grow at a lower rate than the previous year. However, industry is the worst hit, with the growth rate at just a third of the previous year.
Most worrying is the performance of the manufacturing sector, projected to grow at just 2 per cent against 6.9 per cent in the previous fiscal. Manufacturing sector growth hold the key to job creation as one direct job in this sector leads to the creation of four indirect jobs.
Construction, electricity, gas and water supply were the other laggards, while some sectors, including mining, public administration, and defence, showed some improvement.
According to DK Srivastava, Chief Policy Advisor at EY India, the key news in CSO’s first advanced estimates is the fall in the nominal GDP growth to 7.5 per cent in FY20 compared to the previous peak of 13.8 per cent in financial year 2013, a fall of 6.3 percentage points. “This translates into a fall in tax revenues and an increase in the fiscal deficit, both detrimental to growth. The estimated real GDP growth at 5 per cent was earlier anticipated by the RBI, and the CSO release confirms the continuing slowdown,” he said.
Sunil Sinha, Principal Economist with India Ratings, said that even nominal GDP growth estimated at 7.5 per cent for FY20 will have a significant implication for the economy, most importantly relating to fiscal deficit and debt servicing.
“A lower denominator will magnify the fiscal deficit as a percentage of GDP and borrowing at a cost higher than nominal GDP will pose debt servicing challenge,” he said.
The value of GDP is projected at ₹147.79-lakh crore and ₹204.42-lakh crore at constant and current prices, respectively. With this, the calculation for fiscal defict will also change and is likely to be 3.5 per cent of GDP against the 3.3 per cent projected in the Budget.