Near zero GDP today, among fastest growing next year: FM on Indian economy

Finance Minister Nirmala Sitharaman on Tuesday said that growth rate in the country's gross domestic product (GDP) may be hovering at near zero during the current financial year. However, with signs of economic revival, the country may well be one of the fastest-growing large economies during the next financial year.

"We expect that the overall GDP growth, notwithstanding the pandemic, should be near zero this time. Next year, we will see India itself as one of the fastest-growing economies," Sitharaman said addressing the India Energy Forum meet by CERAWeek. This comes at a time when the International Monetary Fund (IMF) had projected India’s GDP to plunge by 10.3 per cent during the current financial year, revised down compared to its June forecast of 4.5 per cent decline.

India's economy has been the fastest growing large economy, but of late it has been overtaken by China. For instance in 2019-20, India's economy grew 4.2 per cent, while the Chinese economy expanded six per cent in 2019. Against the contraction in India's economy expected for the current financial year, IMF projected China's economy to grow 1.9 per cent in 2020. However, India's economic growth is projected by the Fund to overtake China's next year as the former is predicted to grow 8.8 per cent while the latter at 8.6 per cent.

As a sign of revival, the minister highlighted the foreign direct investment numbers for the period between April and August 2020. "During this period, FDI inflows grew by around 13 per cent compared to a non-covid 2019. Such an increase never happened in India's case," Sitharaman said. She also highlighted the revival in Purchasing Managers’ Index (PMI) as a key to the upcoming sustainable revival of the economy expected during the third and fourth quarter of the current financial year

"We can see a revival particularly in terms of PMI. There was a spurt in numbers as it was the highest after 2012. This itself indicates that the revival is steady and sustainable. This sustainable revival will happen in Q3 and Q4," she said. As per reports, the headline seasonally adjusted IHS Markit India Manufacturing PMI increased from 52.0 in August to 56.8 in September--highest since January 2012. In PMI, an indicator above 50 means expansion and below 50 means contraction. In the month of April, the indicator had contracted after being consecutively on the growth territory for 32 months.

The finance minister also pinned hopes on the festive season in driving India's revival story by pushing consumer demand. "Indicators show that primary sectors, related sectors of agriculture and rural India are all doing very well. As a result, consumption for durable goods, agricultural equipment and vehicles are all going up. Festival season has commenced in India. As a result of which, I expect demand to grow up and could be sustainable," she said.

Sitharaman highlighted that as a step towards this revival from the pandemic situation, the primary focus areas of India would be infrastructure and public spending on infrastructure. She expressed hope that the 6000-odd projects mentioned under the National Infrastructure Pipeline will be the key drivers for this. Other focus areas of the government include agriculture and related activities such as processing of food, the export of agricultural goods and making sure the connectivity to the nearby ports are also there to boost the imports. The government is also targeting the energy and fintech sectors too as the key focus areas in the revival story.