Battered by Covid, India unlikely to achieve $5-trn economy dream by FY25

The April-June quarter GDP numbers were slightly weaker than the corresponding estimates, with growth coming in at 20.1 per cent. It is despite the fact that the GDP number is much above than that of the comparative number in the year-ago period when the entire nation was afflicted with lockdowns and the economic growth had almost come to a standstill, resulting in quite a low base we had. So, rather than rejoice, it is a moment for having a soliloquy.

While we are likely to see lower freebies in the festive season which has already begun, the lack of credit appetite is another cause of worry. Added to its woes, the country witnessed a slight fall in GST revenue on month-on-month basis at Rs1.12 trillion from Rs1.16 trillion a month ago. Here, it is important to note that indirect tax collections comprise an essential ingredient for calculation of GDP.

True, our direct tax collections, an integral part of GDP, have been better in the first four months of the current fiscal. To be precise, gross tax collections in April-July have already crossed 31 per cent of the budgetary target for the year and higher than previous year by 30 per cent, which may be a reason for us to cheer up. Not to mention that it was despite the fact that the newly launched portal of income tax department has developed glitches since its inception and the government may have to extend the last date for filing of I-T return as a Hobson's choice.

That India's services activity grew by 1.5 per cent for the first time in this period also provides some solace as IHS Markit Purchasing Managers' Index rose to 50.7 in August from 45.4 a month back which augurs well for the country's economy.

But this is not all. That too at a time when the country is bracing up to join the $5 trillion economy by 2025. Going by what the former RBI governor, Dr C Rangarajan recently said that the dream could be realized only when it was deferred to the year 2030 and the country's GDP continues to grow at the rate of 9 per cent in a row for next few years, which may be crucial, though it may be at 9.5 in the current fiscal.

The portending danger of arrival of third wave of pandemic in near future poses yet another challenge and hence it's time the government started working on measures to counter it so as to allow economic activities to grow steadily.

So, we can rely on the rallying capital market which was currently zooming at an all-time high level. While Nifty is rushing to become 'Adult' in case it goes beyond 18,000, Sensex is well on its way to become 'Senior Citizen' as it has already marched past the magical figure of 58,000 and crossing 60K may be a few days away.