Economic Survey 2018: India could grow faster than the Central Statistics Organisation (CSO) estimate for the current fiscal and regain the coveted tag of the world’s fastest-growing major economy by 2018-19, as it sheds the impact of demonetisation and the GST, according to the Economic Survey for 2017-18, tabled in Parliament on Monday. The survey said the economy is “picking up quite nicely,” and will grow 6.75% in the current fiscal, against 6.5% estimated by the CSO, factoring in some of the latest high-frequency data that couldn’t be factored in the CSO estimate. The growth is expected to rise further to touch 7-7.5% in 2018-19, it said. However, rising oil prices and any sharp correction in the elevated stock prices, provoking a “sudden stall” in capital flows pose risks to growth, said the survey, released just two-days before the NDA government is to present its final full-year Budget. The economy had grown 7.1% in 2016-17. India must continue to improve the climate for rapid economic growth on the strength of the only two truly sustainable engines – private investment and exports, it said.
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Retail inflation will continue to ease this fiscal and is expected to hit a six-year low of 3.3% in 2017-18, with the economy moving towards a more stable price regime. The decline was broad-based across major groups, barring housing and fuel and light. “That this growth has been achieved in a milieu of lower inflation, improved current account balance and notable reduction in the fiscal deficit to GDP ratio makes it all the more creditable,” said the survey report authored by a team led by chief economic advisor Arvind Subramanian.
The agenda for the next year remains full: further stablising the GST, completing the actions against the twin balance-sheet problem (bad loan-encumbered banks and over-leveraged companies), privatising Air India, and staving off threats to macro-economic stability. “The TBS actions, noteworthy for cracking the long-standing ‘exit’ problem, need complementary reforms to shrink unviable banks and allow greater private sector participation,” it said.
However, concerns have been expressed about growing protectionist tendencies in some countries and average crude oil (Indian basket) prices have risen by around 14% so far in 2017-18 (mid January 2018), compared with 2016-17. Going by the recent trends, the average crude oil prices could be in the vicinity of $ 56-57 per barrel in the current financial year and could rise by another 10-15% in 2018-19.
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“However, with world growth likely to witness moderate improvement in 2018, expectation of greater stability in GST, likly recovery in investment levels, and ongoing structural reforms, among others, should be supporting higher growth. On balance, country’s economic performance should witness an improvement in 2018-19,” the survey said.