In a marginal increase, India's gross domestic product (GDP) for the third quarter FY 20 (Q3) (October- December) on Friday, stood at 4.7%, according to the latest figures released by Central Statistics Office. This is a 0.2% increase from Q2 GDP numbers when India's growth stood at 4.5%. In comparison to FY19's 6.6% growth rate, this quarter saw a continued slump in the economy with the RBI predicting a growth rate of 6% for FY 20-21.
Amid the Coronavirus outbreak hitting the global supply chain, consumption has grown slightly in Q2 by 5% compared to 3.1%. Meanwhile, investment collapsed to 1% compared to an almost 12 percent growth registered in the same quarter last year due to falling bank credit, a crisis in the NBFC sector and the slump in consumer spending. Manufacturing, on the other hand, grew marginally by 2%, while Construction growth fell to a six-year low to 3.2%. The corporate tax cut which was implemented in September seems to boost investment marginally leading to a slight recovery in the Indian economy.
Forging a clear growth path forward, in her Budget speech, Finance Minister Nirmala Sitharaman projected the nominal growth rate for the year 20-21 at 10%, followed by 12.6 percent and 12.8 percent in FY22 and FY23, respectively. Even before the significant slowing in economic expansion in 2019, nominal GDP growth had averaged about 11 percent over the five years from 2014 to 2018. Moody's, on the other hand, projected that the economy to rebound at a more modest pace, with nominal GDP growth rising to around 8.7 percent in fiscal 2020 and 10.5 percent in fiscal 2021, from about 7.5 percent in fiscal 2019.
In a bid to encourage more consumer spending, Union Finance minister Nirmala Sitharaman tabled the Union Budget for the year 2020-2021 announcing an optional tax regime offering major cuts to individual taxpayers who forego reductions and exemptions. Apart from this, the Finance Minister announced a Life Insurance Corporation of India (LIC) will be listed as part of the government disinvestment initiative and the government will sell also its stake in the IDBI bank. Apart a new 'NRI tax', she also announced a slew of policies aimed at education, infrastructure, agriculture etc.