The economy is likely to grow by 7.6% in the October-December quarter of the current fiscal the fastest pace of expansion in five quarters according to India Ratings.
India Ratings said growth may have ticked higher in the third quarter by 7.6% compared to 7.4% in the second quarter of this fiscal.
“Growth is likely to get support from favourable base effect as GDP in the third quarter last year grew by 6.6%. Also domestic demand witnessed during the festival season is expected to support growth even as global headwinds have had an adverse impact on manufacturing and exports” India Ratings chief economist Devendra Pant said.
He said investment activity has been muted due to low capacity utilisation in several manufacturing sectors highly leveraged balance sheets of infrastructure companies and stretched balance sheets of banks.
The official GDP data for the third quarter of the current fiscal is scheduled to be released on Monday.
On the other hand estimates by the National Council of Applied Economic Research (NCAER) show that GDP will grow at 7.4% for 2015–16 and 2016–17.
The NCAER review said the prospects for agricultural sector in 2015–16 remain weak owing to poor monsoon for the second year in a row.
Agricultural growth during the first half of the current financial year reduced to 2% from 2.4% witnessed in the first half of 2014–15.
NCAER estimates however suggest that rabi output may perform comparable to previous year and the overall foodgrain output for this year may be marginally higher approximately 1-2%.
The cumulative industrial growth during April-November period in the fiscal year 2015–16 stood at a decent 3.8% outpacing the growth seen during the same period for the past three years.
The NCAER said on the fiscal front which was 68.1% of the Budget Estimate (BE) 2015-16 till September 2015 increased to 87% by November 2015 but is still well below the number (98.9%) for the comparable period last year.
NEW DELHI: Indian economy is expected to grow at 7.4 per cent in the current fiscal despite weak performance of agriculture sector due to poor monsoon NCAER said.
The GDP growth rate forecast is 7.4 per cent for 20152016 and 201617 the economic policy thinktank said in a report.
According to the National Council of Applied Economic Research (NCAER) report prospects for agriculture sector in 201516 remain weak owing to poor monsoon rainfall for the second year in a row.
Agricultural growth during the first half of the current financial year fell to 2.0 per cent from 2.4 per cent in the first half of 2014-15.
However rabi output may be comparable to the previous year and the overall foodgrain output for this year may be marginally higher by approximately 12 per cent it said.
With regard to factory output it said the Index of Industrial Production (IIP) contracted sharply in November 2015 with the index declining 3.2 per cent down from a fiveyear high of 9.8 per cent in October 2015 and a growth of 3.8 per cent in the comparable period last year.
Manufacturing sector accounting for 75 per cent of the total industry was the biggest contributor to the fall in industrial growth with manufacturing IIP witnessing a steep fall of () 4.4 per cent in November 2015.
Nonetheless the cumulative industrial growth during AprilNovember period in fiscal year 201516 stood at a decent 3.8 per cent comfortably outpacing the growth seen during the same period for the last three years it said.
As far as services sector is concerned the report said leading indicators present mixed signals in the first three quarters of current fiscal.
The growth of banking indicators have been mixed with lower growth in aggregate deposits and higher growth in bank credit to the commercial sector.
At the C D Deshmukh Memorial Lecture organised last week by the National Council of Applied Economic Research its director Shekhar Shah had an awkward moment when his voice cracked during his address. Reserve Bank of India (RBI) Governor Raghuram Rajan came to Shah’s rescue by walking up to him and offering him a glass of water. After recovering his composure Shah said “When the RBI governor offers you water when you need it you know monetary policy is in the right hands.” Rajan in his lecture later at the same event said he preferred the path of macroeconomic stability to reckless economic growth. In his policy review on February 2 the governor did not cut policy rates preferring to wait for Budget announcements on fiscal consolidation.
The Indian Railway (IR) system is one of the four railway systems in the world that transports more than one billion tonnes of traffic annually. As against a growth of 4 per cent to 4.5 per cent in the last few years, IR is likely to achieve only 1 per cent growth in 2015–16. This is indicative of a plateauing of the growth in freight traffic. The main objectives of this study are and (a) identify the underlying reasons for the plateauing of freight traffic in the current year, (b) assess the prospects for 2016–17 and suggest possible strategies that IR could adopt for the coming year.
Reserve Bank of India governor Raghuram Rajan on Friday said that a growth rate of over 7% was a credible achievement given wobbly conditions in the world economy but cautioned the government against being “over ambitious” and asked it to contain its borrowings.
“It is to the immense credit of the government that we have over 7% growth low inflation and a low current account deficit” Rajan said. “But it is at such times that we should not be overambitious.” Rajan made these comments during the course of the NCAER’s annual CD Deshmukh memorial lecture on Friday.
Rajan asked the government to get its fiscal math right cautioning that a strategy of borrowing more to boost spending and investment could prove counter-productive and upset the budding recovery signs.
The RBI governor underlined the need for maintaining policy consistency to reinforce India’s credibility as a stable global growth engine.
“Macroeconomic stability relies immensely on policy credibility which is the public belief that policy will depart from the charted course only under extreme necessity and not because of convenience” he said.
He said some recent policies such as UDAY could weaken the government’s balance sheet.
“With UDAY the scheme to revive state power distribution companies coming into operation in the next fiscal it is unlikely that states will be shrinking their deficits which puts pressure on the centre to adjust more” he said.
The government has approved plans for the financially embattled states’ electricity boards in a Centre-assisted bond buying scheme under an umbrella programme called UDAY.
Rajan underlined the need to have healthy banks and said as the health of banks recovers the issue of mergers can be addressed and a few lenders will have to merge to optimise their use of resources. “While the profitability of some banks may be impaired in the short run the system once cleaned will be able to support economic growth in a sustainable and profitable way” he said.
While the government is likely to meet the fiscal deficit target of 3.9% for the current financial year it could face challenges in 2016-17 with the implementation of the One Rank One Pension and 7th Pay Commission recommendations. The fiscal deficit target for 2016-17 is 3.5%. According to IMF estimates — the benchmark for the global investor — India’s consolidated fiscal deficit went up from 7% in 2014 to 7.2% in 2015.
Rajan said the central bank would not change its strategy of targeting inflation. “Let me reiterate that we have absolutely no intent of departing from the inflation framework that has been agreed with the government.”
A day after stating that “there are problems with the way we count GDP” Rajan said he has never raised doubts over the GDP numbers and they are broadly correct. “It was not anything about new GDP numbers or the way GDP is calculated. I think it’s broadly correct” Rajan said. “You do not have to gauge intent. I am direct
He said in Mumbai on Thursday that “There are problems with the way we count GDP which is why we need to be careful sometimes just talking about growth”.
