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India’s GDP growth slows to a 11-year low of 4.2%, Q4 slumps to 3.1 in 2019-20%: NSO

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11-year low GDP growth of 4On May 29, 2020 According to the Provisional Estimates of National Income for the financial year 2019-20 by National Statistical Office(NSO), Ministry of Statistics and Programme Implementation(MoSPI) India’s Gross Domestic Product(GDP) growth has slowed to an 11-year low of 4.2% in 2019-20 & in the final quarter(Q4- January to March) the GDP’s growth rate fell to 3.1%, against 6.2% in the 2018-19, which reflects the impact of the first week of the COVID-19 lockdown which began on March 25.

  • Estimation- GDP at Constant (2011-12) prices in Q4 of 2019-20 is estimated at Rs. 38.04 lakh crore, as against Rs 36.90 lakh crore in Q4 of 2018-19, which shows a growth of 3.1%, the slowest since a 0.2% rise in the fourth quarter of FY09.

Revision of the quarterly GDP for earlier quarters:  October- December period – to 4.1% from 4.7%; July-September period- to 4.4% from 5.1%; April – June period – to 5.2% from 5.6%

Major Highlights

i.This is regarded as the lowest growth rate in the last 44 quarters, it is still higher than the 2.2% growth predicted by most economists and rating analysts.

ii.RBI had pegged the GDP growth for 2019-20 at 5% as projected by the NSO in its first and second advance estimates released earlier this year in January and February respectively 

iii.The budget estimate for GDP growth in 2019-2020 fixed at 8.5%, the NSO’s previous estimates had pushed the projection down to 5%.

iv.The nominal GDP growth rate, which accounts for inflation, is estimated to have grown at 7.2 % in 2019-20, sharply lower than 11 % in the previous year.

Data relating to sectors

i.Manufacturing contracted by 1.4% in the fourth quarter as factories shut toward the end of March. Agriculture and public administration grew 5.9% and 10.1%, respectively. Construction contracted 2.2% & the financial sector saw only a 2.4% rise. Mining sector grew 5.2%.

ii.Cement output fell 86% while fertilisers and crude oil shrank 4.5% and 6.4%, respectively, in April. The decline in electricity generation worsened sharply to 22.8% in April from 8.2% in March.

iii.The output of 8  infrastructure sectors contracted by 38.1 % in April against 5.2 % growth year-on-year. The eight core industries comprise 40.27 % of the weight of items included in the Index of Industrial Production (IIP).

iv.Barring agriculture recorded a growth of 4 % in FY20 as against 2.4 % in the previous year

Key Points

  • Gross fixed capital formation (GFCF), an indicator of investment, shrank 6.4% on the year in the March quarter.
  • Private final consumption expenditure, which reflects consumption demand in the economy, slowed to 5.3 % in FY20 from 7.2 % in the previous financial year. Government expenditure continued to provide support to the GDP, growing 11.8 % in 2019-20, up from 10.1 % in the previous financial year.

Note– 5 years before the 2008 crisis, India had  maintained an 8% GDP growth, so the capacity to endure and recover was stronger. Currently it is facing  a weaker economy and much weaker public finances and fiscal capacity.

Just about a month ago, the International Monetary Fund(IMF) had projected India’s GDP growth in the year to be 1.9%.

Fiscal deficit widens to 4.6% of GDP in 2019-20: CGA

According to the Controller General of Accounts(CGA) data, the fiscal deficit for 2019-20 which signifies the gap between government revenue and expenditure has  widened to 4.59%(~4.6%) of GDP, higher than the revised estimate of 3.8 %. 

Major Highlights

i.The revenue deficit was 3.27 % & The effective revenue deficit was 2.36 %, Finance Minister Nirmala Sitharaman in the budget pegged the fiscal deficit for 2019-20 at 3.8 %, up from 3.3 % in the original budget estimate. 

ii.The fiscal deficit for April reached 35.1% of the FY21 target of Rs 7.96 lakh crore due to lower revenue, which was hit hard as economic activity came to halt after the lockdown was imposed to contain the spread of Covid-19.

iii.The government’s net tax revenue was Rs 21,412 crore in April, which reveals a 70% decline as against Rs 71,637 crore in April last year.

iv.The fiscal deficit, or the gap between the government’s revenue and expenditure, came in at Rs 9.35 lakh crore in March, which was 22% higher than the targeted Rs 7.66 lakh crore.

Reason for increase in the fiscal deficit– It is mainly due to the shortfall in revenue collection during 2019-20, the revenue receipts during the year was 90 % of the revised estimate.

Key Points

  • In absolute terms, total receipts of the government were Rs 17.5 lakh crore against the estimate of Rs 19.31 lakh crore. The data showed the government’s total expenditure was Rs 26.86 lakh crore, lower than Rs 26.98 lakh crore projected earlier.
  • For the previous financial year, the government’s total revenue was at Rs 17.5 lakh crore, about 10% short of the budgeted Rs 19.31 lakh crore. The expenditure for the FY20 was at Rs 26.86 lakh crore or 99.5% of the target.

NSOIt is responsible for conducting large scale sample surveys in diverse fields on an All India basis.
Controller General of Accounts– Soma Roy Burman