Economy / UN estimates India’s GDP growth from 7.6% to 5.7%; 7th agency reduced projection

• Central Statistics Office and RBI forecast 5% growth
• China grew 6.1% in 2019, its lowest in 30 years; Still 1.1% higher than India’s projected growth

new Delhi. The United Nations (UN) has reduced India’s GDP growth forecast from 7.6% to 5.7% in 2019-20. The UN is the 7th institution to have reduced India’s growth projection. Earlier, World Bank, RBI, SBI, ADB, Moody’s and Nomura also reduced growth projection. However, the UN estimate is 0.7% higher than the government and RBI’s estimate of 5%. The UN’s projection comes at a time when China has also released growth figures. China’s growth was 6.1% in 2019 due to trade war with the US. This is the lowest in 30 years. Still 1.1% higher than India’s projected growth.

3 reasons for the decline in GDP growth

1. Auto Sector: The sector witnessed a slowdown last year. Vehicle sales recorded the fastest decline in 19 years. The auto industry accounts for 7% of the country’s GDP and 49% of the manufacturing GDP.
2. IIP: Despite major steps like corporate tax cuts in September, industrial activity in the country remains sluggish. The Index of Industrial Production (IIP) registered a steady decline in August, September and October. The IIP declined by 4.3% in September. This was the fastest decline in 8 years. There was a 3.8% decrease in October. However, industrial production rose 1.8% in November due to improvement in manufacturing sector activities.
3. NBFCs: According to economists, one of the reasons for the decline in GDP growth is the cash crisis of non-banking finance companies (NBFCs).

3 other indicators of economy: inflation is rising in the country, employment is decreasing, but the stock market boom

1. Retail inflation rate the highest in five and a half years
   The retail inflation rate in December was 7.35%. This is the highest since July 2014. Inflation was more affected in December due to increase in prices of vegetables, especially onions. Vegetables became 60.5% costlier in December. Pulses prices rose by 15.44%.
2. Unemployment rate to be highest in 45 years, 16 lakh jobs will be reduced this year
   This apprehension has been expressed in SBI’s research report EcoRap. According to this, 89.7 lakh jobs increased in the country in 2018-19, but in 2019-20 this figure may decrease by 15.8 lakhs. The EPFO ​​figures include paid jobs up to Rs 15,000. According to the Center for Monitoring Indian Economy, a research organization on economic affairs, the unemployment rate in the country is 7.6% as on 13 January 2020. The government also said in the NSSO report that the unemployment rate was 6.1% in 2017-18. This is the highest in 45 years.
3. Stock market to record level
   Sensex is above 42,000 for the first time. Sensex has been in the benefit of 1000 points in the last one and a half months despite some big declines in the past. On November 27 it was 41000. According to analysts, the market is gaining momentum due to the purchase of foreign investors. So far this month, foreign investors have made a net investment of about Rs 524 crore.