Slow growth

The first advance estimate of national income for the current year showed that the economy will grow at a slower pace compared with last year


Photo: Pradeep Gaur/Mint
Photo: Pradeep Gaur/Mint

The first advance estimate of national income for the current year showed that the economy will grow at a slower pace compared with last year. Since the projection has not captured the impact of the currency swap on economic activity, it is likely that the gross domestic product growth estimate for the year will be revised lower from the present level of 7.1%.

Although the extent of actual damage to economic activity remains unclear, the incoming news of the cash crunch easing and the government’s expectation of meeting tax collection targets suggest that the impact could perhaps be limited. Still, the government would do well to factor in the growth uncertainty in the budget-making process.

Along with growth implications, it would be important to see the real fiscal impact of the currency exchange programme. A boost to the government’s ability to spend will help recover the lost ground more quickly and support growth, since private sector investment continues to remain weak.

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