Country’s GDP is likely to grow at 8.1-8.5 per cent next fiscal and accelerate to double-digit levels in the coming years on the back of reforms, falling crude prices and likely cut in interest rates, says the Economic Survey.
“In the short run, growth will receive a boost from the cumulative impact of reforms, lower oil prices, likely monetary policy easing facilitated by lower inflation and improved inflationary expectations, and forecasts of a normal monsoon in 2015-16,” said the survey tabled in Parliament today by Finance Minister Arun Jaitley ahead of Union Budget.
The GDP expansion this fiscal is estimated at 7.4 per cent, higher from 6.9 per cent achieved in 2013-14.
Using the new estimate for 2014-15 as the base, GDP growth at constant market prices is expected to accelerate to between 8.1 and 8.5 per cent in 2015-16, it said.
“In the coming year, real GDP growth at market prices is estimated to be about 0.6-1.1 percentage points higher vis-a-vis 2014-15,” the survey said.
The Economic Survey 2014-15 indicates that “a clear political mandate for reform and a benign external environment now is expected to propel India on to a double digit trajectory”.
It said that declines in inflation and “the resulting monetary easing” will provide policy support for growth both by encouraging household spending in interest-sensitive sectors and reducing the debt burden of firms, strengthening their balance sheets.
The RBI, which surprised markets by an unscheduled interest rate (repo rate) cut in January, did not reduced it further from 7.75 per cent.
The final favourable impulse towards higher growth will be the monsoon which is forecast to be normal compared to last year, the survey added.
The Government headed by Prime Minister Narendra Modi, which assumed power in May last year, has initiated a slew of economic reforms, including de-regulation of diesel prices, raising FDI caps in several sectors, and direct transfer of lPG subsidy to beneficiaries.
According to the survey, Indian economy appears to have now gone past the economic slowdown, persistent inflation, elevated fiscal deficit, slackening domestic demand, external account imbalances and oscillating value of the rupee.
Economic Survey projects sub 1% CAD for next fiscal
The Current Account Deficit (CAD) is expected to fall below 1 per cent in the next fiscal on the back of easing of global commodity prices including petroleum products, the Economic Survey 2014-15 said on Friday.
“Assuming a further moderation in average annual price of crude petroleum and other products, the current account deficit is estimated at about 1.3 per cent of GDP for 2014-15 and less than 1.0 per cent of GDP in 2015-16,” the Survey tabled by Finance Minister Arun Jaitley said.
The CAD is the net difference between outflows and inflows of foreign currencies.
Global crude petroleum prices averaged about $47/ bbl in January 2015 and about $90/bbl for the year as a whole (April 2014-January 2015).
Reduction in CAD to about one one per cent in the coming fiscal year has made India an attractive investment destination well above most other countries, the survey said.
The outlook for the external sector is perhaps the most favourable since the 2008 global financial crisis, and especially compared to 2012-13, when elevated oil and gold imports fuelled a surge in the CAD.
CAD had peaked to 6.7 per cent of GDP in the third quarter of 2012-13. A rule of thumb is that a $10 reduction in the price of oil helps improve the net trade and hence current account balance by $9.4 billion, the survey said.
