Growth rate of 8% needed for economy to reach US$ 5 trillion by FY25

Economic survey 2019 which was presented in Parliament on 4th July 2019 highlighted a positive depiction of the Indian economy, projecting the country’s gross domestic product (GDP) would grow at seven per cent in 2019-20, against a five-year low of 6.8 per cent the preceding year. This low in GDP was with political stability facilitating a pick-up in demand and investments. India would need to grow at 8 per cent annually to become a $5-trillion economy by FY25, the survey projected.

The forecast is like what was projected by the Reserve Bank of India, which in June lowered its projection by 20 basis points from 7.2 per cent. A low global attitude procreated by US-China trade tensions has also triggered the central bank to cut interest rates three times this year. Now the focus is shifted to the government’s Budget on Friday for procedures to support the economy.

The finance ministry said in its annual economic survey report that upside and downside risks to growth were evenly balanced, with monsoon rainfall seen slipping the scales. The report was authored by Chief Economic Advisor Krishnamurthy Subramanian.

Prime Minister Narendra Modi's government is extensively working to push up spending to outgrowth economic growth done giving tax incentives to boost consumer demand and investment

The survey, however, signalled that the country might confront a challenge from an economic slowdown impacting tax collections amid rising state expenditure on the farm sector.

An improvement in consumer demand and bank lending is expected by the investment rate’s increase. The RBI’s up-front monetary policy is likely to lower real lending rates, helping boost credit growth and revive investment in the coming months, according to the report on the state of the economy. Additionally, the reduction in bad-loans ratio is seen helping improve the capital expenditure cycle.

Oil prices have stayed stable because of low consumption accounting for about 60 per cent of GDP, the Survey said. Still, a return in consumption is attached to a recovery in farm sector growth, which in turn depends on rainfall. The other downside risks include weaker exports growth and a spill over of the stress in shadow banking sector to this year.

Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.