The Ministry of Statistics and Programme Implementation,
Government of India released first advance estimates for the national income
for the financial year 2019-20 on Tuesday.
The following are some of the key highlights of the estimates
released by the national statistics office:
Real GDP Growth at 4.98% for FY20
- As per the estimates, the GDP (at 2011-12 prices) is likely to record a growth of 4.98% during the financial year 2019-20. The real GDP for FY20 is expected to be Rs147.79trn compared to Rs140.78trn.
This is a steep fall from the 6.8% growth recorded in FY19. This
in fact would be the slowest rate of GDP growth since 2003 growth rate of
3.84%.
- The Gross Value Addition (GVA) during this period is expected to have grown by 4.9%.
...primarily supported by sharp jump in public expenditure
- ‘Electricity, Gas, Water Supply and Other Utility Services’ (5.4%), ‘Trade, Hotels, Transport, Communication and Services related to Broadcasting’ (5.9%), 'Financial, Real Estate and Professional Services’ (6.4%) and ‘Public Administration, Defence and Other Services’ (9.1%) are the sectors that may perform better than the overall growth rate.
Union Government Expenditure Net of Interest Payments grew by
17.8% during April-November, 2019-20. It is clearly evident that public
expenditure (perhaps at the expense of fiscal prudence) has supported the
growth, otherwise the real growth could have been much lower.
- ‘Agriculture, Forestry and Fishing’ (2.8%), ‘Mining and Quarrying’ (1.5%), ‘Manufacturing’ (2%) and ‘Construction’ (3.2%) have performed poorly.
...Manufacturing and Construction growth collapsed
- Manufacturing growth has collapsed in FY20 to 2% from 6.9% in FY19. Construction sector growth has fallen to 3.2% from 8.7% recorded last year, despite huge increase in public sector spending.
- The Railway freight (Net Tonne Kilometer) has contracted by (-)4.1% during April-November 2019 period. The Passenger traffic also recorded negative growth of (-)0.9%.
Nominal GDP growth even worse, US$5trn by 2024 remains a
distant dream
- The GDP at current prices is likely to grow at 7.5% during FY20 to Rs202.42trn (US$2.81trn). Assuming no change in the current USD-INR exchange rate of 72, Indian economy would need to grow at 15.5% CAGR for next 4years to become a US$5trn economy.
FY20, per capita income growth at 6.8% vs 10% in FY19
- The Per Capita Net National Income during 2019-20 is estimated to be ₹1,35,050 showing a rise of 6.8% as compared to ₹1,26,406 during 2018-19 with the growth rate of 10.0%.
Share of consumption rise, investment contracts
- Private consumption expenditure at current prices is expected to rise to 60.2% of GDP from 59.4% in FY19.
- Government consumption expenditure at current prices is expected to rise to 11.9% from 11.2% in FY19.
- The investment share in GDP is likely to contract to 28.1% from 29.3% in FY19.
Foreign trade contracts
- The share of exports in GDP may contract to 18.4% of GDP in FY20 against 19.7% in FY19.
- The share of imports in GDP may contract to 21.2% of GDP in FY20 against 23.2% in FY19.
The advance estimates of GDP are in line with my expectations,
and may see little more revision on the downside. It is pertinent to note that
RBI in its latest Policy statement in December had also revised its GDP growth
forecast for FY20 to 5% from 6.1% assessed in in October policy meet.
These estimates are however at significant variance from the
estimates used for the setting budget targets in July. The union budget for
FY20 presented in July 2019 has apparently estimated nominal GDP growth at
12.2% for the purposes of calculating deficit and revenue. A 40% lower nominal
GDP growth could distort the entire fiscal maths of the government.
More on this tomorrow....
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