FM says overall GDP growth in FY21 could be close to IMF’s -10.3% estimate; expects festive season to spur, sustain demand
In the government’s first remarks about the growth outlook for this year, Finance Minister Nirmala Sitharaman on Tuesday said that India’s GDP could see zero or negative growth, somewhat close to the International Monetary Fund’s projection of -10.3% for 2020-21.
The Minister, however, exuded confidence that a steady and sustainable recovery was already underway, adding India would emerge as one of the fastest growing economies next year.
‘Agri doing well’
“The indicators show that the primary sector and related sectors of agriculture and rural India are doing very well,” Ms. Sitharaman said. “As a result, the demand for durables, agriculture equipment, tractors, vehicles are all going up. The festival season has commenced in India, as a result of which I expect the demand to go up and therefore, be sustainable also,” she added.
Citing the Purchasing Managers’ Index (PMI) for the manufacturing sector in September, which stood at 56.8, Ms. Sitharaman said that this was the highest since 2012 and indicated that the revival was going to be steady and sustainable. “If that sustainable revival is going to happen between the third and fourth quarters, we expect that the overall GDP growth, notwithstanding the pandemic, should be something which as is being predicted by the IMF, growth will be negative or near zero this time. Next year, it will be clearly India seeing itself as one of the fastest growing economies,” she said.
The IMF, in its World Economic Outlook released earlier this month, forecast India’s GDP would shrink 10.3% in 2020-21, and likely rebound to grow at 8.8% in the next financial year.
The contraction in the first quarter was a result of the government’s conscious decision to ‘put lives before livelihoods’ and enforce a ‘very firm lockdown’, the Minister said in response to a query about India’s economic outlook by Lance Uggla, chairman and chief executive officer of IHS Markit, which compiles the PMI. Mr. Uggla said the firm’s global economics team expects India’s GDP growth to reach 9.3% next year.
To revive the economy, the government is eyeing sectors that can help build assets and generate employment, the Minister said, adding that public spending on infrastructure and boosting agriculture and easing farm produce exports, were part of that plan.
Ms. Sitharaman, who was speaking at the India Energy Forum, said that India should have a greater role in setting global fuel prices as one of the largest consumers of energy, adding that the country was looking at investing in strategic fields overseas to achieve this objective.
“We are investing in strategic reserves not just within India, but also looking at buying out fields outside India. This gives us the feeling and commercial sense that units elsewhere where India invests, will enable us to be a part of the global value chain and get to play a part in price determination… Because being the largest consumer, we should also play a part in being active in determining the price,” Ms. Sitharaman said.