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Budget 2016: With FM Arun Jaitley to present the Union Budget 2016-17 on Monday, a closer look at India's turbocharged economic growth figures, which have been tom-tommed frequently, reveals a reason to worry: It's the wrong kind of growth. The figures themselves have been criticized by many analysts for giving too flattering a view of Asia's third-largest economy.
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Budget 2016: Statistically, India's economic growth has overtaken China's. But economists are questioning the official data, which they say has been overestimating the pace of expansion following a change made a year ago to the method GDP is calculated. Finance Minister Arun Jaitley, due to present his third budget on Feb. 29, is under pressure to relax fiscal deficit targets to further ramp up public spending to give the economy more momentum. But the move is likely to further worsen India's debt dynamics. The federal debt-GDP ratio is set end the fiscal year in March at 50.8 percent, according to Reuters' estimates, rising sharply from 46.8 percent in 2014/15 due to a sharp slowdown in nominal economic growth.
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Budget 2016: It would be better all round if Modi were to make faster progress on bank, land and tax reforms. But legislation for the latter two items is stuck in parliament despite the government's large majority in the lower house. "If India wants to be the next emerging market star, it has to reform," said Mark Williams, chief Asia economist at Capital Economics. "There is no alternative."
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Budget 2016: Even after the prime minister's much trumpeted push to expedite clearances for major projects, most remain stalled. In the December quarter, projects worth $155 billion remained stuck due to issues related to land acquisition and funding constraints, according to think-tank CMIE. New private investments in the same period dived 60 percent. Finding it hard to borrow from banks worried by stressed loans at their worst level in 13 years, cash-strapped private firms have kept a lid on fresh capital outlay, dashing Modi's hopes that higher public spending would provide a stronger investment multiplier.
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Budget 2016: Overall investment growth hit a 15-month low of 2.8 percent in the December quarter despite a 34 percent annual increase in public capital spending. Underscoring the downbeat investment activity, Larsen & Toubro (L&T) – a bellwether of India's engineering & construction sector – recently slashed its orders outlook. "Policies are being announced, good intentions are there," S.N. Subrahmanyan, deputy managing director at L&T. "What needs to be done is to hold the hand of the entrepreneurs to see that the concrete is poured on the ground."
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Economic Survey 2016: Finance Minister Arun Jaitley's meeting with the economists just two days ahead of the Budget, which had generated a lot of curiosity, has been cancelled. The meeting with economists on Saturday, ahead of the Budget presentation for 2016-17 (on Monday), was confirmed by a Ministry spokesperson who described it as one to explain "economic analysis of macro-economic situation" after the presentation of Economic Survey 2016. <br><strong>Read more:</strong> <a href="https://www.financialexpress.com/article/budget-2016/economic-survey-2016-live-updates-fm-arun-jaitley-state-of-economy-union-budget-2016/216364/"><strong>Economic Survey 2016 LIVE updates: Govt tables Economic Survey 2015-16, FY17 GDP seen at 7-7.75%</strong></a>
