GDP growth rate for 2018-19 revised downwards to 6.1 pc

New Delhi: India’s economic growth is likely to get a statistical bump in the current fiscal following a sharp downward revision in the estimates for the previous year.

The first revised estimates for FY19 released on Friday showed India’s gross domestic product (GDP) grew 6.1% in the year, down from 6.8% estimated earlier, mainly due to deceleration in mining, manufacturing and farm sectors.

Other things being equal, the lower base for FY19 will push growth for the current fiscal to 5.7% from 5% estimated in the numbers released last month, slowest pace of growth in 11 years.

In the second revised estimate for this year, GDP growth for 2017-18 stood 7% against earlier estimate of 7.2%. For FY17, there was a marginal increase in GDP growth from 8.2% to 8.3%, data released by the national statistics office showed.

“The higher growth of 5.7% is based on the revisions made today,” said Soumya Kanti Ghosh, group chief economic advisor at State Bank of India.

Sakshi Gupta, senior economist at HDFC Bank, said the downward revision in FY19 growth provides some statistical support to this year’s growth figures but this would be supportive at the margin and the expenditure compression planned for Q4 this year is likely to weigh on growth.

“We expect a below 5% growth figure for FY20,” said Gupta.

The statistics office cited use of updated estimates of production and prices of some crops, livestock products, fish and forestry products, and provisional results of Annual Survey of Industries 2017-18 in place of inflation and production data as reasons for the 2017-18 revision.

Replacement of ‘Revised Estimates’ of different items of expenditure and receipts in the Central & State government budgets by ‘Actuals’ along with use of updated information on local bodies & autonomous institutions, updated MCA21 database, PSUs, SEBI and others were the other causes of the downward revision.

“The growth rates for FY19 may well undergo additional changes once the data from the Annual Survey of Industries becomes available,” said Aditi Nayar, principal economist at ICRA.



SECTORAL WORRY
Only the tertiary sector grew from FY18 to FY19 while those of primary and secondary sectors declined. The growth of primary sector was only 1%.

The growth in real GVA (gross value added) in 2018-19 has been lower than that in 2017-18 mainly due to relatively lower growth in agriculture, forestry & fishing, mining and quarrying, manufacturing, electricity, gas, water supply & other utility services, financial services, public administration and defense and other services.

The sharpest downward revision was seen in mining and quarrying that shrank 5.8% as per the revised estimates compared to a 1.3% growth projected in the provisional estimates of May 31.

The savings rate fell further to 29.7% in FY19 from 32% in the year before, highlighting the concerns that declining savings are a structural constraint to growth. The rate of gross capital formation to GDP declined to 32.2% in FY19 against 34.2% during FY18. “The rates of capital formation in the years 2011-12 to 2018-19 have been higher than the rate of saving because of positive net capital flow from RoW (rest of world),” the statistics office said.

The per capita income is estimated as Rs 1,15,293 and Rs 1,26,521 for 2017-18 and 2018-19, respectively in current price. In constant 2011-12 prices, it is estimated at Rs 92,085 in FY19 compared to Rs 87, 828 in the year before.

Per capita Private Final Consumption Expenditure (PFCE) at current prices for the years 2017-18 and 2018-19 is estimated at ?76,794 and ?84,808, respectively.