InvestorQ : Government is estimating real rate of growth at 5% for the full year in GDP. Is that really achievable in the fiscal year 2019-20?
Aashna Tripathi made post

Government is estimating real rate of growth at 5% for the full year in GDP. Is that really achievable in the fiscal year 2019-20?

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Tisha Malhotra answered.
1 year ago
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If the real rate of growth has to touch 5%, then there are two things that will have to work favourably for the government. The first is the nominal growth and the second is the impact of the Chinese Coronavirus in the fourth quarter. Let me focus on both these aspects.

· The big worry is on the nominal growth front. For FY2019-20, nominal GDP is estimated to grow at 7.5%. That is way below the 11% nominal GDP growth that India needs to sustain to give a tough fight to China. In fact, China maintained 12-13% nominal rates of growth for close to 30 years, which explains the Chinese growth story. If India wants to get to higher growth rate, then nominal growth has to get closer to 11%.

· Secondly, the impact of the Coronavirus may not be fully factored in. NSO estimates have pegged full year GDP growth at around 5%. Since, Indian GDP has grown at 5%, 4.5% and 4.7% in the first 3 quarters; the growth assumed in the fourth quarter is closer to 5.8%. That looks ambitious unless the full impact of the Coronavirus on growth has been factored in. That means; 5.8% growth in Q4 would be tough and consequently 5% growth for the full year will also be a tall order.

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