Not just GDP, estimates for 2019-20 GVA are also weak

New Delhi: The current growth slowdown is reflected not just in the first advance estimates of GDP growth in fiscal 2020 pegged at 5%, but also in the estimate of gross value added (GVA) pegged at 4.9%.

As per official estimates, GVA, which is GDP minus net taxes, is expected to grow at 4.9 percent in 2019-20 compared to 6.6% a year ago. GVA is a more realistic guide to measure changes in the aggregate value of goods and services produced in an economy.

The estimates are based on the growth numbers of the first two quarters of the current fiscal as well as other higher frequency data.

India's gross fixed capital formation has been estimated at 1%, against the 10% of the previous year.

According to thee Statistics Ministry data, while private final consumption expenditure (PFCE) in 2019-20 may grow at 5.8 %, against 8.1 percent in fiscal 2019, the gross fixed capital formation (GFCF) - a metric to measure corporate investment activity - is expected to come in at 1% against 10% in the previous year.

Government final consumption expenditure (GFCE), or government expenditure is expected to grow at 10.5 percent in 2019-20, against 9.2 percent a year ago. The estimates say, farm sector is set to grow at 2.8%, against 2.9 percent last year, while the mining sector is likely to grow at 1.5%, as compared 1.3% (y-o-y).

The anufacturing sector is expected to grow at 2%, against 6.9% a year ago, and the construction sector at 3.2% as against 8.7% a year ago,

Nominal GDP growth is pegged at 7.5%, versus 11.2% a year ago.

Industry sector is expected to grow at 2.5% (6.9% a year ago), services sector to grow at 6.9% (7.5% a year ago) and financial services and real estate are estimated to growth at 6.4% against 7.4% a year ago.

Nikhil Gupta, Chief Economist, Motilal Oswal Financial Services said the CSO has pegged the advance estimate of real GDP growth at 5%, which is same as by the RBI .

"The CSO expects personal consumption growth to pick up from 4.1% in 1HFY20 to 7.3% in 2HFY20, which certainly seems optimistic to us. Surprisingly CSO also expects govt consumption to continue to grow strongly at 8.5% in 2HFY20, which seems challenging considering massive receipt shortfall," he said.

The growth rate in per capita income is estimated at 4.3% during 2019-20, as against 5.6% in the previous year. Gross Fixed Capital Formation (GFCF) at current prices is estimated at Rs 57.42 lakh crore in 2019-20 as against Rs 55.70 lakh crore in 2018-19.

The GDP advance estimates are crucial as the Finance Ministry prepares the Budget projections for the next financial year based on the Central Statistics Office (CSO) data for 2018-19.

GDP growth stood at 4.8% for the first half of the current fiscal year. India needs to grow at around 8% a year to reach the goal of a $5 trillion dollar economy by 2025.

(For all the latest News, Mumbai, Entertainment, Cricket, Business and Featured News updates, visit Free Press Journal. Also, follow us on Twitter and Instagram and do like our Facebook page for continuous updates on the go)

Free Press Journal

www.freepressjournal.in