The Indian economy is expected to expand by 7.5 per cent on the back of consumption-led growth in the current financial year, says a Dun & Bradstreet report.
The growth in 2016-17 will be largely driven by low global crude oil prices, good agriculture production, measures taken by the government to uplift rural demand and the 7th Pay Commission payouts, it said.
Reforms on foreign direct investment and clearance of Bankruptcy Code, GST and Debt recovery bill are expected to create a better investment climate and improved ease of doing business in the country, it said.
“In view of these positive developments and a normal monsoon so far, we expect India’s economic growth as measured by GVA at basic prices to grow by 7.5 per cent in FY17 (2016-17) as against 7.2 per cent in the previous fiscal,” said Arun Singh, Lead Economist, Dun & Bradstreet India.
“The resiliency of the domestic economy during FY16 amidst the fragile global economic scenario revels that India is poised to curve its growth story driven by several steps taken by the government,” he said.
D&B cautioned however that stressed assets in the banking sector, non-revival in corporate investment and declining exports could be a major drag to overall growth.
According to the research firm, investment rate is likely to increase marginally to 35.4 per cent this fiscal; however a meaningful recovery in investment activity could be expected in 2017-18.
Meanwhile, savings rate to remain almost flat at 33.9 per cent during FY17 as against 33.4 per cent expected in FY16.
The report said the Indian corporate sector was exposed to profitability pressures and high debt burden in 2015-16 and this vulnerability has translated into substantial deterioration in banking sector’s asset quality.
“However, in FY16, there were series of initiatives taken by the government in the areas of mining, insurance, FDI, real estate, ease of Doing Business, etc. The impact of these initiatives on economy will get reflected over a period of time,” the report added.