The Central Statistical Organisation (CSO) expects the pace of GDP growth to slow to 5 percent in the current fiscal and the nominal growth will be 7.6 percent. So, on March 31, 2020 India is going to be Rs 204 trillion economy and not Rs 211 trillion economy – that makes the math of fisc and several other things a little different.

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Soumya Kanti Ghosh, group chief economic advisor at State Bank of India said yesterday's gross domestic product (GDP) advance estimates has a shelf life only for 2 months. “This number will be revised by the end of February, when the Q3 estimates are out and also possibly in May when the second estimates of this number will be announced. So from that point of view this number is going to have a downward bias,” he added.

“Lower nominal GDP impacts all macro variables beginning from fiscal deficit, makes the path of the fiscal consolidation even more difficult. Apart from that it makes the policymakers cognizant of the fact that we need to take steps, which should pull India out of current demand slowdown,” added Ghosh.

He further said, “I am not surprised that capital goods number is at such low level and I don’t expect it to improve overnight. However, maybe second half of next fiscal could be the time when you could look at some growth numbers showing some positive vibes.”

When asked about impact of higher crude prices on fisc, Ghosh said that rise in crude prices by USD 1 per barrel will increase state revenues by Rs 2,500 crore. That is the only positive but otherwise it will have an impact on GDP, on current account deficit and also inflation with a lag, he added.

“If oil prices stay at these levels or create uncertainty in the minds of the public, it will impact discretionary consumption also. So from that point of view it will be negative for the GDP growth,” Ghosh added.

According to him yields will be an uncertain territory. “Since, we are staring at a huge borrowing number for FY21, excess borrowing possibly this year and maybe next year will continue to keep the pressure on yields in the market,” he said

With regards to inflation, he said, “Inflation numbers for this month, which will release next week, will be a negative surprise. It will be closer to 7 percent now maybe 6.7-6.8 percent. There is also little hope for inflation to be benign in the next couple of months. So it could stay in the range of 5.5-6.5 percent."

"My sense is that monetary accommodation looks increasingly difficult in the next two policies. June, I am not sure but as of now, our call is that of a prolonged pause from the RBI,” he added.

First Published:Jan 8, 2020 9:37 AM IST