The government expects economic growth to rebound this year from a five-year low, as political stability aids a pickup in demand and investments. Real gross domestic product growth for the financial year started April 1 is projected at 7%, the Finance Ministry said in its annual Economic Survey report.
The plus and minus chances to growth are fairly stable, with monsoon rainfall seen tilting the scales, it said.
The Survey authored by Krishnamurthy Subramanian, Chief Economic Advisor said that “The political stability in the country should push the animal spirits of the economy, while the higher capacity utilization and an uptick in business expectations should increase investment activity.”
The outlook marks a growth from the 6.8% expansion last year and is the same as the Reserve Bank of India’s reading, which in June dropped its projection by 20 basis points from 7.2%. A gloomy global outlook spawned by US-China trade tensions also urged the central bank to cut interest rates three times this year, with the focus now shifting to the government’s Budget on Friday for measures to boost the economy.
The RBI’s easy monetary policy is assumed to lower real lending rates, helping lifting credit growth and revive investment in the coming months, according to the report on the state of the economy. Further, the narrowing in the bad-loans ratio is seen helping boost the capital expenditure cycle.
Oil prices staying well under their 2018 peak are also positive for consumption, which accounts for about 60% of the gross domestic product, it said. According to a survey, still, a rebound in consumption is tied to a recovery in farm sector growth, which in turn depends on rainfall. The other downside uncertainties include weaker export growth and spill over of the stress in the shadow banking sector to this year.
The southwestern monsoon, which irrigates more than half of India’s farmland, has been below normal after a delayed started to the season. As much as 69% of the country got insufficient rainfall during June 1-July 2 periods, according to the weather office.
“Some regions are expected to receive less than normal rains,” the survey said, underlining the risks. “On balance, the prospects of the economy should improve.”Share this to your,