Indian economy to grow 7.7% in this fiscal: Survey

Indian economy will grow 7.7 per cent in the ongoing fiscal amid likely improvement in the industrial and agricultural sectors' performance on account of good monsoon, though the investment cycle is expected to take at least 6 months to witness a pick-up, says a survey.

"The growth in 2016-17 is expected to be supported by an improvement in the agricultural and industrial sector performance. Prediction of a good monsoon after two consecutive years of sub-optimal rainfall backs the improved outlook in the current fiscal," according to the Ficci's Economic Outlook Survey that puts across a median GDP growth forecast of 7.7 per cent for FY 2016-17.

The Reserve Bank last month had forecast a 7.6 per cent growth for the current fiscal on the back of favourable monsoon, a notch lower than the upper end of government's range of 7 per cent to 7.75 per cent.

Moreover, the agriculture sector is expected to record a median growth of 2.8 per cent in 2016-17, with a minimum and maximum range of 1.6 per cent and 3.5 per cent, respectively.

Industrial growth is expected to grow by 7.1 per cent in 2016-17, while services sector growth is estimated at 9.6 per cent.

The survey was conducted during April/May 2016 among economists belonging to the industry, banking and financial services sector. The economists were asked to provide forecast for key macro-economic variables for the year 2016-17 as well as for Q4 (January-March) FY16 and Q1 (April-June) FY17.

In addition, economists also shared their prognosis about the expected recovery in the investment cycle. A majority of them were of the view that investment cycle will take at least two more quarters to witness a pick-up.

A majority of the economists also felt that while the government and the RBI are working together to address the issues at hand, recovery in the banking system will take time.

"It was unanimously felt that a turnaround in this fiscal year looks unlikely and an improvement in numbers would not come until next financial year," Ficci said.

The economists observed that the passage of Insolvency and Bankruptcy Code Bill, 2015 is a very positive step to deal with the challenging issue of exiting unviable businesses.

Easy exit for a business would help in speedy winding up, productive redeployment of capital and ensure greater availability of credit by freeing up of capital.

The median growth forecast for index of industrial production (IIP) has been put at 3.5 per cent for the year 2016-17, with a minimum and maximum range of 3 per cent and 4.5 per cent respectively.

However, the outlook of the participating economists on inflation remained moderate. The median forecast for Wholesale Price Index based inflation rate for 2016-17 has been put at 2.2 per cent, with a minimum and maximum range of (-)1.3 per cent and 2.9 per cent, respectively.

The Consumer Price Index has a median forecast of 5.1 per cent for 2016-17, with a minimum and maximum range of 4.5 per cent and 5.5 per cent, respectively.

Significantly, economists were asked whether government will be able to achieve the fiscal deficit target of 3.5 per cent in 2016-17.

"A majority of the participating economists believe that the fiscal deficit target for the year 2016-17 seems achievable," Ficci said.