Management Discussion & Analysis

FY 2019-20  



The Indian economy has been exhibiting lacklustre growth in the face of global volatility amidst weak manufacturing, muted domestic demand and volatility in oil prices.

Real GDP growth has slowed down from 6.1 per cent in fiscal 2018-19 to 4.2 per cent in the backdrop of the slowdown in private consumption, lower tax collections, fund allocation challenges at the State and Central Government levels, and a sharp slowdown in credit growth. To overcome the slowdown, various reforms were announced by the Government in FY 2019-20, viz. reduction in corporate tax rates, a scheme to provide a one-time partial credit guarantee to public sector banks (PSBs) for purchase of pooled assets of financially sound non-banking financial companies (NBFCs), recapitalization of public sector banks, relaxation of external commercial borrowing guidelines for affordable housing, setting up of a Realty Fund for stalled housing projects, merger of 10 public sector banks into four entities and revised Priority Sector Lending (PSL) norms for exports.

Private sector investments continued to be muted in the areas of industrial capex and building infrastructure. Public sector spending, however, remained firm and was robust in the areas of core infrastructure, driven by the Government’s commitment to boost investment across multiple infrastructure sectors. The Government also announced the National Infrastructure Pipeline (NIP) of projects worth ₹ 100+ lakh crore up to FY25, with a focus on energy, roads, railways, urban infrastructure and irrigation projects


to provide a much-needed productivity boost to the Indian economy and fulfil India’s aspiration to become a USD 5 trillion economy by 2025. The NIP, coupled with other ’pro-business’ policy initiatives, is expected to lead to a rebound in domestic demand in the medium and long term.

Global Economy

The global economy had its share of upheavals in the year 2019-20. Amid prolonged trade disputes and wide-ranging policy uncertainties, growth suffered broad-based deterioration. Global trade has declined and there has been a marked slowing-down in manufacturing activities, even though the service-sector activity has held up to some extent.

The escalation of tension between the US and China is expected to further dampen global growth. The fall in crude oil prices, occasioned by changes in the demand-supply position and geopolitical events across OPEC+ countries, has also had an impact on commodity prices, which have been largely depressed globally. The pandemic has led to a sharp contraction in the demand for oil and commodities, and recovery is likely to happen only after global economies tide over the COVID-19 crisis. Fragilities in the financial sector in a number of economies continue to remain a concern, though this has been partly addressed through increased liquidity, which has been boosted by a series of stimulus measures undertaken by all large economies.