Economy growth to contract 4.5% in 2020 due to Covid-19: Finance ministry report

NEW DELHI: India’s economic growth is expected to contract 4.5 per cent in the current fiscal year, the ministry of finance stated in its macroeconomic June 2020 report. The report cited a 6.4 percentage point plunge in the gross domestic product (GDP) number in comparison with the April 2020 forecast.
The ministry noted that shrinkage is in line with downward revision of global economic growth amid the ongoing Covid-19 pandemic.
“Given the immense uncertainty associated with infection and macroeconomic recession curves of countries across the world, IMF (International Monetary fund), in its World Economic Outlook (June 2020) report, has downward revised global growth to (–) 4.9 per cent in 2020, 1.9 percentage points lower than its April 2020 forecast,” the macroeconomic report stated.
“All regions across the world are projected to experience negative growth in 2020, the first time in history. While advanced economies are projected to contract by 8 per cent in 2020, 1.9 percentage points lower than the April forecast, growth in emerging market and developing economies has been forecast at -3.0 per cent, a downward revision of 2 percentage points,” it added.
India’s real GDP growth rate was 4.2 per cent in 2019-20 as per the provisional estimates released by the National Statistical Office, compared to 6.1 per cent recorded in previous year.
The report further stated that net tax receipts for 2019-20 stood at Rs 13.56 lakh crore, 9.9 per cent lower than the amount envisaged in revised estimates. The shortfall in direct tax collection contributed to 75 per cent of the shortfall in non-debt receipts. While, the shortfall in indirect taxes was of the tune of 0.14 per cent of GDP, which was largely led by shortfall in customs and GST collections (Centre).
The interruption in economic activity also led to shortfall in revenue collection during the first two months of the FY 2020-21. While, fiscal deficit stood at Rs 4.7 lakh crore till May 2020, revenue receipts registered a negative growth of 68.9 per cent, led by negative growth in personal income tax, all indirect taxes and non-tax revenue.
However, the report noted that government of India and the Reserve Bank of India (RBI) have taken prompt policy measures – both short term and long term – in a calibrated manner to reinvigorate the economy at the earliest so as to provide immediate relief to vulnerable households and firms.
As a result, early green shoots of economic revival have emerged in May and June with real activity indicators like electricity and fuel consumption, inter and intra-state movement of goods, retail financial transactions witnessing pick up.
Consumption of petroleum products increased by 47 per cent from 99.37 lakh metric tonnes in April to 146.46 lakh metric tonnes in May,
The country reported a huge spike of 24,248 new coronavirus cases in the last 24 hours along with 425 fatalities, the Union health ministry said. The number of recoveries stood at 4,24,433 and 19,693 people have succumbed to the disease till now.

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