NITI Aayog CEO Amitabh Kant has warned that the current slowdown in the economy will impact India’s stated objective of becoming a US $5 Trillion economy by 2025. He made a presentation before the members of the Standing Committee on Finance of the Parliament headed by Jayant Sinha.
The think tank has estimated that to achieve this objective, the Nominal GDP (which doesn’t take into count the prevailing inflation) has to grow at a rate of 12.4% on average for the next few years. The current nominal GDP for the Q1 of FY20 is at 8%.
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The government will soon be releasing the next set of numbers for Q2 (July-September) in this regard and it is expected that the nominal GDP will decrease.
The real GDP (which takes into account the prevailing inflation rate) is currently around 5% and a report of the State Bank of India, estimates it to fall further to 4.2% in Q2, results for which are still awaited.
Amongst the various reasons listed by Kant, a fall in the domestic consumption and investment is a cause for serious concern. He pointed that they will be the main drivers of economic growth and revival.
The data provided reveals that gross fixed capital formation in the sub sector of “dwellings, other buildings and structures” fell from 12.8% of GDP in 2011-12 to 6.9% in 2017-18.
The bank’s ability to lend capital to businesses too have been severely impacted because of the growing non-performing assets and issues of corporate governance.
Various sectors such as textiles, automobiles etc have reported a slump in demand.
In this regard, Kant called for the immediate fixing of various structural challenges the Indian economy is currently facing.