Ahead of the release of the second quarter gross domestic product (GDP) data on Thursday, Rajya Sabha debated the state of the economy. India is staring at a growth slowdown, but finance minister Nirmala Sitharaman said that the country will never face a recession.
Congress MPs walked out during finance minister's response accusing the government of being in denial.
DK Joshi, chief economist at CRISIL, shared his views on the likely outcome of the GDP data. He said that there is a belief at the ratings agency that economy has slowed down compared to when the goods and services tax (GST) regime came into effect.
On tax collection, Joshi said: “Last year also we had a shortfall and this year’s growth is going to be lower than last year. I think collecting taxes in a slowing economy is a tough business and so we do expect a shortfall in tax this year,” he told CNBC-TV18.
On GDP estimate, the chief economist said: “The short-term indicators whether it is industrial production, exports, bank credit, tax collections, freight movement, electricity production, credit, everything is weaker than the first quarter. Inflation has spiked but core inflation is down which confirms that there is weakness in demand. So Q2 is going to be definitely lower than Q1.
“We are working with an estimate of 4.5 percent GDP growth in the second quarter,” he added.
On recession, Joshi said, “India suffers from what I would terms as growth recession; growth slowing down. We do not have a technical recession where the GDP goes negative. I think that’s probably never going to happen, but there are segments are like auto etc., which had seen degrowth. So technically the output has fallen in these segments.
“However, for an overall economy we can at best have growth recession which means slowing down of growth,” Joshi added.
Further, he said that the government has to do the heavy lifting when it comes to boosting growth. “One can argue that the weakness in the auto sector is, the speed with which they were falling, I think that has come down. Beyond that Q2 doesn’t show any improvement. Third quarter will show some mild stabilization around the low equilibrium that we have and Q4 will show an upward movement.”