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India’s economic growth likely to decline to 4.9% in Q2FY20: NCAER

With sustained slowdown in almost all the sectors, economic think-tank National Council of Applied Economic Research (NCAER) has said that India’s economic growth is likely to decline to 4.9% in the second quarter of this fiscal (Q2FY20). Earlier, the country’s economy grew at 5% in the first quarter of 2019-20 – the slowest pace in over six years. Besides, the think-tank has pegged Gross Domestic Product (GDP) growth at 4.9% as for the full fiscal 2019-20 against 6.8% in 2018-19.

NCAER further said the monetary policy measures are unlikely to revive growth at this juncture and suggested providing fiscal stimulus, which too can be challenging unless it can be financed through better revenue generation. It said ‘whether the growth deceleration may be bottoming out or not, we will know in next two weeks based on the Q2 growth figures of the government. However, the current poor growth is mainly due to a demand problem. It can be addressed through fiscal measures.’

Stressing that the focus should be on fiscal measures, it said there is a need to pump up expenditure without pushing up the fiscal deficit. It said that there are ways of doing it and added that there is a huge fiscal space which has not been used. It is myth that some say there is no fiscal space. It said revenue foregone is 5% of the country’s GDP and about 1.5% of GDP is locked up as excess appropriation of the budget which has not been spent. Even the government is not paying the bills. It said ‘so, there is a lot of fiscal space, but you need take tough measures. First of all, we need to reduce exemptions on indirect tax custom duties. There was no need to reduce corporate tax. Are companies investing after that this makes the position worse.’