GDP Growth: Mild recovery possible but slowdown hangs heavy in the air

“My own assessment is that it would be slightly better than the second-quarter number,” said NR Bhanumurthy, a professor at National Institute for Public Finance and Policy (NIPFP) in Delhi.

New Delhi:Indian economy is widely expected to turn a corner in the third quarter (October-December) period in this fiscal but the recovery will not be as much as the government has assumed, said economist NR Bhanumurthy. There is a possibility that the forecast of 5% GDP growth for the whole year will have to be revised downward, he said.

The Central Statistics Office (CSO), the nodal agency for measuring the GDP and inflation numbers, is expected to release the GDP data for the third quarter on Friday.

“My own assessment is that it would be slightly better than the second-quarter number,” said NR Bhanumurthy, a professor at National Institute for Public Finance and Policy (NIPFP) in Delhi.

“The advance estimate suggests five per cent GDP growth for the whole year which means the economy needs to grow at a rate of 5.5-6% for the next two quarters, which in my view will not happen,” Professor Bhanumurthy told ETV Bharat.

PM Narendra Modi with FM Nirmala Sitharaman

India’s GDP growth has slowed down to a six-year low at the start of Prime Minister Narendra Modi’s second term. The GDP growth rate, which was 7% during the second quarter (July-September) of FY 2018-19, came down to just 4.5% during the same period in this fiscal (FY2019-20). This is the lowest growth rate since the January-March quarter of FY 2012-13 when it had plunged to just 4.3%.

According to Professor Bhanumurthy, who monitors public finances, the economic recovery will be so weak that it will result in a downward revision of yearly growth forecast for the country’s GDP.

“I am more concerned about the whole year. If the third-quarter numbers are not as expected then there will be downward revision for the whole year,” he said.

GDP growth percentage quaterly

He says the economy needs to grow 5.5% or more in the remaining two-quarters of this fiscal to achieve the average growth rate of 5% for the whole year but given the state of other indicators, it is unlikely to happen.

“Economic recovery will not be to the extent that the government has assumed,” he said.

GDP data will confirm the efficacy of stimulus

The quantum of growth registered in the third quarter will also be indicative of the efficacy of the measures announced by Finance Minister Nirmala Sitharaman last year.

In August-September last year, she had announced a slew of measures to shore up a slowing economy, which included a sharp cut in the corporation tax rate for the new manufacturing units and recapitalization of banks and non-banking finance companies, among other things.

However, economists like Nobel laureate Professor Abhijit Banerjee criticised the decision of giving concession to the corporate sector and demanded its rollback. He instead advocated the expansion of PM-Kisan Samman Nidhi to non-farmers and increased payment under NREGA to boost the demand side.

(Article by Senior Journalist Krishnanand Tripathi)