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    Nominal GDP needs to grow above 10% for wage growth

    Synopsis

    At present, India’s nominal GDP growth stands at 7.5 per cent against 11.20 per cent a year ago.

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    The manufacturing sector in India is going through one of its difficult phases with flat profit as well as declining wage growth, said Devendra Pant, Chief Economist at India Ratings.

    The present situation in the manufacturing sector reflects the downward trajectory of nominal gross domestic product (GDP) and gross value added (GVA) growth, he added.

    Commenting on the measures the government should take to boost the manufacturing sector, Pant added that unfortunately, it cannot do anything straight away.

    He believes that if demand revives than nominal GDP may see a growth of 10-12 per cent and it will automatically reflect in profit and wage growth.

    At present, India’s nominal GDP growth stands at 7.5 per cent against 11.20 per cent a year ago.

    “Only the government can do to make policy, which is conducive for growth and make policy which can revive demand. If that happens then it will start reflecting in the sector,” Pant added.

    India Ratings and Research on Wednesday also said that it expects GDP to grow at 5.5 per cent in FY21.

    The agency’s forecast is marginally higher than the GDP growth of 5 per cent estimated by National Statistical Office for FY20.

    The current slowdown in economic activity, according to the agency is primarily owing to the abrupt and significant fall in lending by non-banking financial companies.

    India Ratings also believes that a strong policy push coupled with some heavy lifting by the government is required to revive the domestic demand cycle.

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