GDP Growth Rate Slump: Another Blow to Modi Govt's Economic Growth Story

Andrew Cummings
May 31, 2020

"We had forecast that GDP for Q4 will touch a new low at below 4 per cent". Among the key sectors of the economy, the agricultural sector has exhibited and improved growth of 4.0%, while the mining and quarrying sector has returned to positive growth of 3.1% in FY2020.

Since the revised nominal size of the economy for 2019-20 has been scaled down marginally from the earlier estimate of Rs 204 trillion to Rs 203 trillion, the fiscal deficit widened to 4.6% GDP - the biggest slippage seen in recent times.

The government had imposed a lockdown to curb the spread of COVID-19 from March 25, 2020.

Manufacturing and construction in 2019-20 showed poor growth numbers, at 0.03% and 1.3%, respectively - down from much higher numbers of 5.7% and 6.1% - in the year-ago period.

It is still unclear whether Prime Minister Narendra Modi's government will extend the lockdown again, although it has severely jolted an already slowing economy and put over 120 million people out of jobs according to a recent estimate by the Centre for Monitoring Indian Economy.

China's economy had contracted by 6.8 per cent in January-March 2020, showing the impact of COVID-19.

There was a marginal improvement in the GDP growth rate in Q3 of FY20 at 4.7%, after it declined for five consecutive quarters. Even private final consumption expenditure grew at a lower rate of 5.3% in 2019-20, against 7.3% in the previous year. Trade, hotels, and transport grew 2.6 per cent in the January-March quarter from a year ago, while financial services expanded 2.4 per cent.

Financial, real estate and professional services growth fell to 2.4% in Q4 FY20 from 8.7%. "In 2020-21, the growth outcome will depend on the balance between the positive contribution of agriculture and public administration and defence services, and the subdued performance of manufacturing, construction and the two heavyweight service sectors", he explained. The NSO said India would attain a per capita income of "Rs 94,954 during 2019-20 as against Rs 92,085 in 2018-19".

The Central Statistics Office has revised downwards the growth in the October-December quarter of 2019-20 to 4.1 per cent from 4.7 per cent.

Meanwhile, data released by the commerce ministry showed that eight core industries contracted by 38.1% in April 2020 due to the coronavirus-induced lockdown.

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