Estimated GDP growth at 5%: Consumption, exports, imports to contract in FY20

Estimated GDP growth at 5%: Consumption, exports, imports to contract in FY20

There has been a broad-based decline across different components of GDP, barring government expenditure, which has led to the overall fall in the real GDP growth to 5 per cent

The advance GDP estimate puts the country's growth at its slowest pace since FY09
Niti Kiran
  • New Delhi,
  • Jan 08, 2020,
  • Updated Jan 08, 2020, 2:20 PM IST

The Central Statistics Office (CSO) has estimated that GDP growth for fiscal 2020 would be 5 per cent as against 6.8 per cent in the preceding year. This advance estimate puts the country's growth at its slowest pace since FY09. The cumulative GDP growth in the first half of FY20 has been 4.8 per cent. This implies that growth will be marginally higher in the second half of FY20. However, these numbers must be read with caution as the methodology clearly says that these are extrapolations of the existing data on various sectors which could range from 6 months to 8 months. Therefore, there is scope for change in these numbers when the actual numbers are reckoned.

There has been a broad-based decline across different components of GDP, barring government expenditure, which has led to the overall fall in the real GDP growth to 5 per cent. Consumption is estimated to moderate from 8.1 per cent in FY19 (provisional estimates) to 5.8 per cent in FY20 (advance estimates).

There is a notable decline in the growth of gross fixed capital formation (GFCF) from 10 per cent in FY19 (revised estimates) to 1 per cent in FY20 (advance estimates), which is reflective of subdued investment activity in the economy. The share of gross fixed capital formation (as a per cent of current GDP prices) has fallen from 29.3 per cent in FY19(RE) to 28.1 per cent in FY20(AE). The investment rate is at its lowest level since FY2002, highlighted a CARE Ratings report.

Exports is estimated to contract by 2 per cent during FY20 as against 12.5 per cent growth recorded a year ago and the same can be attributed to weak global trade activity led by the tariff war between US and China. Imports, too are estimated to contract by 5.9 per cent in FY20(AE) which is indicative of weak consumption demand in the economy, the report added.

GDP is estimated to be higher in the second half of the fiscal with the low base effect. Consumption will be an important component in H2-FY20 to drive the overall GDP growth given the steep decline in case of GFCF, lower growth in government expenditure and contraction in exports. CARE estimates GDP growth to be at 5.2 per cent during FY20.

Also read: Govt's advance estimate pegs GDP growth at 5% for FY20

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