Data Drive: Building a way out of the economic slump

By: |
Published: January 11, 2020 2:30:58 AM

The government has responded with a major infrastructure push, targetting investments worth Rs 102 lakh crore within the next five years, but the plan seems too ambitious.

Data Drive, economic slump, economy slowdown, gdp, economy  newsFor one, even when the economy was performing well, India was not able to meet its investment targets.

International agencies and analysts have been revising their forecasts of Indian GDP, but the government has held that the economy is not in crisis. The release of first annual estimates for the economy show that growth has come down to 5%. While India was growing by 7% until last year— the fastest-growing major economy in the world then—low investment, coupled with slow down in private consumption has brought down growth. Even the rising government expenditure has not been able to arrest the fall in growth numbers. While the next two quarters are expected to be better given the base effect, Indian economy still has a lot to deal with as most economists who were earlier terming the growth as cyclical, are highlighting structural issues.

The government has responded with a major infrastructure push, targetting investments worth Rs 102 lakh crore within the next five years, but the plan seems too ambitious. For one, even when the economy was performing well, India was not able to meet its investment targets. If we were to presume the government’s projections—it is expecting nominal growth to average 12% over the next five years—this would mean an investment growth of 6.5%. One needs to keep in mind that the investment ratio in the period between FY13-17, when growth averaged 10% was just 5.7%.

Further, if we are to consider a more realistic growth projection of 8%, the average investment ratio would jump to 7% of the GDP. More important, for FY21, investment will have to be nearly 10%, an impossible task given that even in its best years investment ratio has been just a notch above 6%. The government will, thus, have to explore other avenues if it needs to consider propping up the economy. While government has allocated 25% of the funds to power sector and 20% to roads, till issues like discom losses aren’t fixed, the question is who will be ready to invest?

Get live Stock Prices from BSE and NSE and latest NAV, portfolio of Mutual Funds, calculate your tax by Income Tax Calculator, know market’s Top Gainers, Top Losers & Best Equity Funds. Like us on Facebook and follow us on Twitter.

Next Stories
1Everything you need to know about CRISPR-Cas9 helping in gene therapy of deadly diseases
2Independent Directors: A test of competence?
3Opening coal mines a big leap! The way forward