Study Material | Test Series
Drishti IAS
call1800-121-6260 / 011-47532596
Drishti The Vision Foundation
(A unit of VDK Eduventures Pvt. Ltd.)
mains Test Series 2018
GDP of India Likely to Average 6.5% in Next 5 Years
Apr 23, 2014

Analytical firm CRISIL Research said in its study titled Of Growth and Missed Opportunity that it expected the Indian economy to grow by 6.5 per cent yearly, on an average, from 2014-15 to 2018-19—roughly the period of the next government if it lasts a full term. This is way down from the 9 per cent annual growth rate from 2003-04 to 2010-11.

Sales of products in various sectors—automobiles, consumer durables, housing, cement, steel— would be substantially impacted, as a result. This would have repercussions on poverty reduction and employment generation. Even this base-case forecast of 6.5 per cent annual growth “is premised on a decisive mandate in the coming general elections”. If a rag-tag coalition comes, economic growth could be stuck at 5 per cent annually in the next five years. The economy crawled at a decadal low of 4.5 per cent in 2012-13 and is officially projected to expand 4.9 per cent in 2013-14.

CRISIL did not rule out economic growth rising above 6.5 per cent, but said there was a natural limit to it. If everything falls in place, growth could raise much above 6.5 per cent, but nowhere near the 9 per cent heyday.” 

The chief economist of the CRISIL attributed this difficulty in returning to 9 per cent growth to the bad health of the financial sector, excess capacity in companies (particularly in automobiles), no room for counter-cyclical measures in both monetary and fiscal terms, and pending environmental issues. 

A 6.5 per cent growth would result in the sale of 16.5 million passenger vehicles (cars, vans, sports utility vehicles) in five years from the current financial year, compared to 18.5 million that would have come if the economy grew by 9 per cent a year on an average. If the economy grew at five per cent annually, sales would be fewer by 4 million vehicles.

Similarly, 6.5 per cent growth would lead to less sales of scooters by 10 million and of commercial vehicles by 0.5 million, compared to 9 per cent growth. Sales of televisions would be fewer by 13 million, refrigerators by 6 million, washing machines by 4 million and air-conditioners by 6 million.

As for housing, the study estimated 1.13 millon units would be sold in 10 major cities over the next five years, if India managed 9 per cent annual growth and only just over 1.03 million units at its projection of 6.5 per cent. Similarly, it estimated less sale of cement by 125 million tons and steel by 42 million tons.

Also, it estimated the proportion of people below the poverty line to decline to only 17.3 per cent by 2018-19 from nearly 22 per cent in 2011-12. This implies only 6.2 million people will be pulled out of the morass annually over the next five years, compared with 20 million between 2004-05 and 2011-12. With 9 per cent annual growth, India's poverty would have declined sharply to 13.6 per cent of the total by 2018-19, pulling 49 million more—close to 18 per cent of the current number of the poor—out of destitution.

The lesser growth rate also meant non-farm employment over the next five years would at best grow by 37 million. On the other hand, in the seven years to 2018-19, India's working age population would have swelled by at least 85 million. Of these, 51 million would be seeking employment. This means an additional 14 million will be forced to either depend on low-productivity agriculture or remain unemployed.


Helpline Number : 87501 87501
To Subscribe Newsletter and Get Updates.

http://www.drishtiias.com/upsc-current-affairs-article-GDP-of-India-Likely-to-Average-6.5-in-Next-5-Years