GDP growth expected to 'strongly rebound' to 6-6.5% in FY21, estimates Economic Survey

The Economic Survey 2019-20 has estimated that India's growth rate will "strongly rebound" to 6-6.5% from 5% estimated in the current fiscal. 

Tabled in the Parliament on Friday, the Economic Survey said that the government with a strong mandate has the capacity to expedite reforms.

There are tentative signs of bottoming out of a slowdown in manufacturing activity and global trade, which will have a positive impact on growth in the next fiscal, the survey said. 

The theme of the Economic Survey this year is wealth creation.

Speaking to reporters, Chief Economic Advisor Krishnamurthy Subramanian, the architect of the survey, said, "We have a slowdown in the Indian economy, part of it is because of the global economy slowing down in 2019."

Analysis of wealth creators by entrepreneurs shows that wealth creation benefits everyone, he added. 

He acknowledged the loss to exchequer by the wilful defaulters and the government could have spent almost double the amount on social sectors if the wealth had not been eroded. 

The government's thrust on affordable housing, Make in India, reduction in the corporate tax rate, and improvement in ease of doing business, besides others factors, will help in boosting economic growth, it added. 

However, it has also cautioned that continued global trade problems, escalation in US-Iran geopolitical tensions, and weak economic recovery in advanced economies are the downside risk which have the potential to drag down the growth.

"On a net assessment, it appears that the upside risks should prevail, particularly when the government, with a strong mandate, has the capacity to deliver expeditiously on reforms," the survey tabled by Finance Minister Nirmala Sitharaman said. 

"GDP growth of India should strongly rebound in 2020-21 and more so on a low statistical base of 5% growth in 2019-20," it said. 

On a net assessment of both the downside/upside risks, it said "India's GDP growth is expected to grow in the range of 6-6.5% in 2020-21."

On 2019-20 GDP, it said the estimate of 5% growth suggests an uptick in expansion in the second half of 2019-20.

The survey also stresses that deceleration in GDP growth can be understood within the framework of a slowing cycle of growth. The financial sector has acted as a drag on the real sector.

The survey said that the uptick in second half of 2019-20 would be mainly due to 10 positive factors like picking up of Nifty India Consumption Index for the first time this year, an upbeat secondary market, higher FDI flows, build-up of demand pressure, positive outlook for rural consumption, rebound of industrial activity, steady improvement in manufacturing, growth in merchandise exports, higher build-up of foreign exchange reserves and positive growth rate of GST revenue collection.

The document also emphasised that merger of public sector banks may increase the financial strength of the merged entities, lower the risk aversion and result in lowering of lending rates.

Further, as the implementation of GST further settles down, the increased unification of the domestic market may reduce business costs and facilitate fresh investment.

Reforms in land and labour market may further reduce business costs, said the survey, presented a day before Sitharaman's Union Budget 2020-21. 

(With PTI inputs)