Govt sees nominal GDP at 12.2% till FY25; assuming average inflation of 4%

Finance Ministry
The Centre is expecting nominal gross domestic product for 2020-21 to grow 10.5 per cent compared with its revised estimates for 2019-20, the data given in the National Infrastructure Pipeline report shows.


The report, commissioned by the Ministry of Finance’s Economic Affairs Department, and released by Union Finance Minister Nirmala Sitharaman on Tuesday, projects nominal GDP for 2020-21 to be Rs 227 trillion, while the estimate for 2019-20 is now seen at Rs 205.37 trillion, from the earlier Budget estimate of Rs 211 trillion.


For 2024-25, the report projects nominal GDP of Rs 365.5 trillion. Reaching that mark would require an average nominal GDP growth rate of 12.2 per cent annually from 2020-21 to 2024-25.


Calculations show for 2022-23, 2023-24, and 2024-25, projected nominal GDP growth is 12.6 per cent, 12.8 per cent, and 13 per cent, respectively. Even if one assumes an average inflation rate of 4 per cent for these years, real GDP growth is supposed to be upwards of 8 per cent, which seems quite ambitious.


The pipeline has identified projects across 23 sectors and 18 states and union territories, and they will be funded over the next five years by the central and state governments and the private sector.


The planned investment so far is Rs 102 trillion, which is expected to go up to Rs 105 trillion over the next few weeks.


Thirty-nine per cent of the projects will be implemented by the Centre and states each while 22 per cent will be by the private sector. The government is expecting the private sector’s share to go up to 30 per cent by 2024-25.


The pipeline includes brownfield and greenfield projects by the Centre, states, private companies, state-owned companies as well as those under the public-private partnership model. According to the data given in the report, some Rs 42.7 trillion (43 per cent) worth of projects are under implementation, those worth Rs 32.7 trillion (about 33 per cent) are at conceptualisation stages, and the ones estimated at Rs 19.1 trillion (about 19 per cent) are under development.


The sectors identified include traditional power and renewable power, railways, roads, urban development, irrigation, aviation, education, and health. The lion’s share of the funding is expected to go to the energy sector, including power, renewable, and oil and gas. Energy projects of nearly Rs 24 trillion have been lined up, with nearly Rs 20 trillion in roads and nearly Rs 14 trillion in railway projects planned.


As the chart given shows, the Centre’s budgetary support as a percentage of nominal GDP is expected to grow from 0.74 per cent in 2019-20 to 1.11 per cent in 2024-25.

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