India’s economy may expand by close to 8% in the current fiscal on policy measures taken by the government to revive private investment and positive impact of a likely normal monsoon, economic affairs secretary Shaktikanta Das told FE.
The central statistics office had projected GDP growth to be 7.6% for the last fiscal year, the provisional data for which is due on May 31. The latest economic survey has projected that the economy would expand between 7-7.75% in the current fiscal.
With India’s weather office recently forecasting an above normal monsoon this year, the prospects of a higher GDP growth has improved, said Das. “I would expect private sector investment this year to be far better than last year,” Das said. His assessment is based on two key factors — the increase in the ability of banks to lend more compared to last year and likely demand pick-up, thanks to a likely normal monsoon after two years of failure.
However, analysts say growth revival may not be on a firm footing. Industrial output grew on-year by a mere 0.1% in March even as CPI inflation climbed to 5.4% in April, reducing scope for further easing of monetary policy by the central bank to support growth.
Das, however, said there are already signs of a demand pick-up with the automobile and cement sectors performing better while the steel sector is in a much more stable condition than it was a year ago. Passenger vehicle sales rose 11% in April, which was highest in five months. A normal monsoon will help boost rural demand.
Das said inflation figures are still within the range and the latest upside was mainly because of seasonal impact of food items such as vegetables, which would cool down soon. The latest weak industrial output growth number could be due to base effect, he added.
Following a surge in non-performing assets (NPAs) in the public sector banks, the government took a number of measures, including infusing capital in the public sector banks. “The problem of stressed assets which looked very grim last year, now looks to be getting under control, increasing the ability of the banks to lend,” the DEA secretary said. This is important, given the fact that the banks’ share in domestic credit intermediation is more than 60%. “I would not like to go so much into the (monthly) numbers, but I would like to go into the overall signs which are now visible in the economy, which I think will bring about more and more investment,” Das said.
The government’s reforms in various sectors and liberalisation of rules has resulted in FDI touching $55.5 billion in FY16, up 23% on year.