India projects rosy economic growth next year after slump

NEW DELHI (AP) — India’s government projects the economy will grow up to 6.5 per cent in the next fiscal year, starting in April, and hopes to follow China’s example in developing labour intensive industries and exports.

An economic survey for 2019-20 presented to Parliament by Finance Minister Nirmala Sitharaman yesterday said the economy grew around five per cent, but shows signs of having bottomed out.

India, the world’s second most populous country, could raise its share of global exports to about 3.5 per cent by 2025 and to six per cent by 2030, it said. And by 2025, it has the potential to create 40 million jobs, when Prime Minister Narendra Modi said India can become a USD5 trillion economy.

The annual review of India’s economy came a day before the 2020-2021 budget presentation in Parliament. India’s financial year runs from April to March.

The upbeat assessment is at odds with the International Monetary Fund’s (IMF) decision earlier this month to downgrade its estimate for India’s 2019-20 economic growth to 4.8 per cent from the 6.1 per cent expansion it projected last October. The IMF cited a sharper-than-expected slowdown in local demand and stresses in the non-bank financial sector.

File photo shows a car driving past an under-construction building in Mumbai, India. PHOTO: AP

Many economists believe Modi’s signature economic policies are at least partly to blame for the slowdown. A surprise demonetisation in 2016 and the hasty roll out of a goods and services tax were dire blows to manufacturing, especially the auto industry.

The government’s survey is a report card on the country’s economic performance throughout the year. It was prepared by the government’s Chief Economic Advisor KV Subramanian.

The report said the industrial production index, which measures manufacturing, mining and utilities output, moderated to 3.8 per cent in 2018-19 compared to 4.4 per cent in 2017-18. During April-November last year, it grew at a 0.6 per cent pace, compared to five per cent in the same period of the previous year.

Growth contracted in tandem with manufacturing activities, constrained by slower credit flows to medium and small industries; subdued domestic demand for autos, pharmaceuticals, and machinery and equipment; volatility in international crude oil prices and uncertainties over trade.

Exports of labour intensive products such as gems and jewellery, basic metals, leather products and textile products have been weaker than expected during the current financial year, the survey showed.