Gross Domestic Product growth slows: Know what it means for you

Gross Domestic Product growth slows: Know what it means for you
A worker operates a hydraulic press machine at a workshop manufacturing flanges for automobiles in Mumbai, India, May 29, 2017. REUTERS/Shailesh Andrade/Files

New Delhi: A drop in the Gross Domestic Product (GDP) growth rate in the Fiscal Year 2020 will impact job opportunities and the underprivileged most, according to reports.

Illustrating the impact of lower GDP growth, R Nagraj, professor of economics at Indira Gandhi Institute of Development Research, said that given per capita monthly income of Rs 10,534 in 2018-19, an annual GDP growth of 5% means that the per capita income will go up by Rs 526 in Fiscal Year 2020.

"Instead, if per capita monthly income grows at 4%, then the income growth will be only Rs 421. This means a 1 per cent reduction in the growth rate has reduced per capita monthly income growth by Rs 105. In other words, a decline in the annual GDP growth rate from 5% |to 4% would mean getting Rs 105 less per month," he said. The total annual loss to a person would be Rs 1,260.

The GDP, which has been slowing down every quarter, reached 5 per cent from April-June in Fiscal year 2020 from 8 per cent during Q1 of 2018-19. Most economic research firms have lowered their GDP forecast for the full financial year.

Cutting down FY20 GDP growth to 6.7% (six-year low) from its earlier forecast of 7.3%, India Ratings and Research (Ind-Ra) on August 28 said the current fiscal year would be the third consecutive year of subdued growth.

Moody's Investors Service envisions India growing at 6.4 per cent in Fiscal Year 2020 as domestic and external headwinds persist through the year. Aditi Nayar, Principal Economist, ICRA, said the pace of expansion of GDP and GVA in Q1 of Fiscal Year 2020 was resoundingly lower than predicted, driven by a collapse in manufacturing GVA growth, in spite of most other sectors performing as expected.

Explaining the impact of lower GDP on the common man, Nagraj said that lower GDP means a proportionate decline in per capita income. Given high inequality in the economy, it is very likely that the poor will suffer more from the decline in the GDP growth rate.

"The number of people below poverty line could rise. A decline in the GDP growth rate could mean a decline in the employment rate," he said.


The GDP at constant (2011-12) prices in Q1 of 2019-20 is estimated at Rs 35.85 lakh crore, as against Rs 34.14 lakh crore in Q1 of 2018-19, showing a growth rate of 5%.

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