Estimates for GVA are also frail

New Delhi: The current growth slowdown is reflected not just in the first advance estimates of GDP growth in fiscal 2020 pegged at 5 per cent, but also in the estimate of gross value added (GVA) pegged at 4.9 per cent.

As per official estimates, GVA, which is GDP minus net taxes, is expected to grow at 4.9 per cent in 2019-20 compared to 6.6 per cent a year ago.

GVA is a more realistic guide to measure changes in the aggregate value of goods and services produced in an economy.

The estimates are based on the growth numbers of the first two quarters of the current fiscal as well as other higher frequency data.

India's gross fixed capital formation has been estimated at 1 per cent, against the 10 per cent of the previous year.

According to the Statistics Ministry data, while private final consumption expenditure (PFCE) in 2019-20 may grow at 5.8 per cent, against 8.1 per cent in fiscal 2019, the gross fixed capital formation (GFCF) - a metric to measure corporate investment activity - is expected to come in at 1 per cent against 10 per cent in the previous year.

Government final consumption expenditure (GFCE), or government expenditure is expected to grow at 10.5 percent in 2019-20, against 9.2 per cent a year ago.

The estimates say, farm sector is set to grow at 2.8 per cent, against 2.9 per cent last year, while the mining sector is likely to grow at 1.5 per cent, as compared 1.3 per cent (y-o-y).

The manufacturing sector is expected to grow at 2 per cent, against 6.9 per cent a year ago, and the construction sector at 3.2 per cent as against 8.7 per cent a year ago.

Nominal GDP growth is pegged at 7.5 per cent, versus 11.2 per cent a year ago. Industry sector is expected to grow at 2.5 per cent (6.9 per cent a year ago), services sector to grow at 6.9 per cent (7.5 per cent a year ago) and financial services and real estate are estimated to growth at 6.4 per cent against 7.4 per cent a year ago.

Nikhil Gupta, Chief Economist, Motilal Oswal Financial Services said the CSO has pegged the advance estimate of real GDP growth at 5 per cent, which is same as by the RBI .

"The CSO expects personal consumption growth to pick up from 4.1 per cent in 1HFY20 to 7.3 per cent in 2HFY20, which certainly seems optimistic to us.

Surprisingly CSO also expects govt consumption to continue to grow strongly at 8.5% in 2HFY20, which seems challenging considering massive receipt shortfall," he said.