ET Online survey: Is 5% growth the new normal for India? A lot hinges on this Budget

Government's own forecast released in the first week of January showed that the economy is likely to grow at 5% in FY20 — the weakest pace in 11 years. India has not seen such a low GDP score since the 3.1% in FY09, the year when the global financial crisis wrecked economies everywhere.

The numbers in the first advance estimates of the National Statistical Office (NSO) reflect a steep fall from the 6.8% growth registered in FY19.

The latest projections are just a continuation of the declining growth trend witnessed over the past few quarters. GDP growth in the first quarter had come in at 5%, before falling even lower to 4.5% in the second.

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Given how things have lately been, how good or bad are the odds of the economy going back to those glory days of 8-9% GDP growth, witnessed not too long ago? Or rather, will India ever go back to that high growth path or will it have to accept 5% GDP as the new normal?

This year's ET Online pre-Budget survey put forward this question to its readers. The findings make for interesting reading.

Despite all the current travails of the economy, not many people believe that India is a gone case. The view that heady days are over for India did not garner even 12% of the total votes.


More than 29% of the survey respondents are of the view that there is more steam left in the economy, and that it is just a matter of time before things fall into place again.

According to our in-house analysts, these two groups' confidence on the economy possibly stems in large part from the measures the government has introduced over the past few months. The steps taken by Modi government include a steep cut in corporate tax rates and an over Rs 1 lakh crore plan for infrastructure, apart from a rescue plan for stalled realty projects. Besides, there are indications that the trade war that kept the world roiled for much of the last year may finally be losing its intensity.

However, considerable challenges still remain. Even if the trade war subsides, it may not lead to major improvements in global trade as the world economy is currently mired in a slowdown. At present, the global growth rate stands at a measly 3%, and economists don't see much upside in the near term.

Also, Modi govt's hands remain fiscally tied, and there is little hope of any material improvement in the situation in the near term.



On top of that, all recent monetary policy interventions have failed to yield desired results. Modi govt has stuck to its guns on adhering to its stated fiscal deficit target, but breaching the target seems to be the only practical way to jumpstart growth at this point. Such a fluid, unsettled situation could be the reason why as many as 22% of the participants refrained from giving a definitive answer to our question.

Those who said that everything depends on the reform trajectory made up the biggest group (over 37%) of respondents. However, with a host of sector-wise measures already introduced, the economy's fate now appears to hinge primarily on structural, long-term reforms.

These should ideally include the likes of (a) reforming the investment scene, (b) less and less role of govt in business, and last but not least (c) land and labour reforms. But these could turn out to be a political hot potato that will involve taking large-scale electoral risks.

Can Nirmala Sitharaman do it this time? February 1 will provide the answer.



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