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Freefall: Slowdown, pandemic pulls India’s FY20 GDP growth rate to 11 yr low

New Delhi: The general economic slowdown, along with the impact of the global Covid-19 pandemic, pulled India’s GDP growth rate down to 3.1 percent in the last quarter of 2019-20.

The Q4 growth rate was slower than 4.1 percent in Q3 and 5.7 percent reported for the like period of the previous fiscal.

Consequently, India’s FY20 GDP declined to 4.2 percent from 6.1 percent in FY19. This is the slowest rate of India’s GDP growth in the last 11 years.

However, the rate, if looked at from the prism of constant prices at 2011-12 prices, would still be the lowest in the last 8 years.

“Real GDP or Gross Domestic Product (GDP) at Constant (2011-12) Prices in the year 2019-20 is now estimated to attain a level of Rs 145.66 lakh crore, as against the First Revised Estimate of GDP for the year 2018-19 of Rs 139.81 lakh crore, released on 31st January 2020,” the National Statistical Office (NSO) said.

“The growth in GDP during 2019-20 is estimated at 4.2 percent as compared to 6.1 percent in 2018-19.”

“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, showing a growth of 3.1 percent.”

On a sequential basis, the quarterly growth rate has progressively come down from 5.2 percent in Q1 of 2019-20 to 4.4 percent in Q2 and 4.1 percent in Q3.

Last fiscal, the Indian economy faced a severe demand slowdown on account of high GST rates, farm distress, stagnant wages, and liquidity constraints.

Additionally, the national lockdown implemented to curb the Covid-19 outbreak has dealt a severe blow to the economy.

However, the NSO said that these estimates on quarterly as well as an annual basis are likely to undergo revisions.

“In view of the global Covid-19 pandemic and consequent nationwide lockdown measures implemented since March 2020, the data flow from the economic entities has been impacted,” the NSO said.

“As some of these units are yet to resume operations and owing to the fact that the statutory timelines for submitting the requisite financial returns have been extended by the government, these estimates are based on the available data.”

Besides, the NSO data showed that the Gross Value Added (GVA) growth rate during the fourth quarter of 2019-20 on a YoY basis fell to 3 percent, from 5.6 percent during the like period of the previous fiscal.

Similarly, the GVA growth rate during 2019-20 on a YoY basis declined to 3.9 percent, from 6 percent during the like period of 2018-19.

The GVA includes taxes but excludes subsidies.

As per the estimates, the growth in ‘agriculture, forestry and fishing’ is estimated to be 5.9 percent from YoY growth of 1.6 percent and ‘mining and quarrying’ of 5.2 percent from (-) 4.8 percent.

On the other hand, ‘manufacturing’ is (-) 1.4 percent from a YoY rise of 2.1 percent and construction activity plunged by (-) 2.2 percent from 6 percent.

Furthermore, the GVA growth rate of ‘electricity, gas, water supply & other utility services’, ‘trade, hotels, transport, communication and services related to broadcasting’, ‘financial, real estate and professional services’ and ‘public administration, defense, and other services’ respectively also declined during this period.

Another key growth gauge — Gross Fixed Capital Formation — which underscores the overall acquisition of produced assets in the economy, at constant (2011-2012) prices, is estimated to have declined to 28.8 percent from a YoY rise of 31.7 percent in Q4 of 2018-19.

For 2019-20, the GFCF fell by (-) 2.8 percent from a YoY rise of 9.8 percent in the previous fiscal.

Commenting on the GDP data, D.K. Aggarwal, President, PHD Chamber of Commerce and Industry, said: “We are optimistic that the growth will revive in the second half of the financial year 2020-21 on the back of various reform measures announced by the Government during the last few weeks.”

India Ratings & Research’s Chief Economist Devendra Kumar Pant said: “From the production side, the growth was driven by agriculture and public administration. Government expenditure has helped both GVA and GDP growth.”

“Going forward, with private expenditure growth dwindling due to the shutdown and labor migration, investment demand contracting due to weak consumer demand and stretched corporate balance sheet, government expenditure will again be the growth engine in FY21.”

According to Suman Chowdhury, Chief Analytical Officer, Acute Ratings & Research: “The figures for FY20 largely reflect the intensification of the economic slowdown that started to build up from Q2/Q3 of FY19. The gradual slowdown in the growth trajectory is indicated in the revised quarterly GDP figures and the estimated print for FY20 at 4.2 percent as compared to 6.1 percent in FY19.”

“Clearly, the growth momentum got further dampened towards the year-end due to the economic disruption from the virus outbreak that already started a couple of weeks before the onset of the pan India lockdown in the last week of March.”

 

 

SOURCE: IANS