NCAER Pegs GDP Growth At 4.9% In 2019-20
A worker pulls a loaded cart along a road in Assam, India. Photographer: Dhiraj Singh/Bloomberg

NCAER Pegs GDP Growth At 4.9% In 2019-20

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The National Council of Applied Economic Research pegged the economic growth for the current fiscal at 4.9 percent, a tad down from 5 percent estimated by the National Statistical Office.

For 2020-21, the NCEAR expects the Indian economy to improve its growth rate to 5.6 percent. India in 2018-19 grew at 6.1 percent.

“GDP growth is forecast to be 4.9 percent in third quarter of 2019-20, and 5.1 percent in fourth quarter of 2019-20. The annual growth rates for 2019-20 and 2020-21 are forecast to be 4.9 percent and 5.6 percent, respectively,” an NCEAR statement said.

The NSO as well as the RBI projected the GDP growth rate at 5 percent for the current fiscal. The NCEAR indicated some improvement in the fourth quarter of the current financial year.

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“Due to better rainfall as well as the post-monsoon seasons and considerable improvement in the storage of water in major reservoirs of the country, the prospects for growth in the agricultural sector remain bright,” the NCEAR said.

Both the Ministry of Agriculture’s second advance estimates and the NCAER’s own estimates point to higher agricultural output in the current fiscal versus the previous year.

This should also lead to lowering of food inflation in the coming months, which has otherwise remained high due to lower-than-expected output of a few commodities, particularly vegetables and pulses, it said.

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The Index of Industrial Production declined 0.4 percent in the second quarter of 2019-20 and 0.9 percent in the third quarter of 2019-20 on a year-on-year basis.

The IIP of capital goods and consumer durables goods declined in the second and third quarters of the current fiscal.

Consumer non-durables also declined in December 2019. Core IIP, however, improved in December 2019, with buoyant growth in key sectors of steel and cement, it said.

The Nikkei PMI improved through November and December 2019 and January 2020.

About green shoots in the services sector, it said, “The GVA of the services sector grew at 6.8 percent in first quarter and 6.9 percent in second quarter of this fiscal. Three lead indicators—tourist arrivals, aviation passenger traffic, and services trade—were the bright spots in third quarter of 2019-20.”

“Cargo traffic across different transport modes continued to show negative growth in the third quarter of the current fiscal,” it said. “After falling to 49.2 in October 2019, the Nikkei PMI Services Index showed a sharp and sustained rebound. This signals that the sector is in the process of bottoming out.”

The 2020-21 budget, it said, has not provided the expected strong fiscal stimulus to revive faltering growth. The revenue projections are still overly optimistic though more realistic than the projections last year.

“Aligning the expenditure projections with these revenue projections, with limited allowance for slippage in the fiscal deficit and no significant steps for additional revenue mobilisation, the 2020-21 budget has failed to provide the required fiscal stimulus,” it said.

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