India GDP To Expand 7%-7.75% Next Fiscal: Economic Survey

India on Friday offered a cautious forecast for economic growth to exceed 7 per cent in the next financial year, as the government prepares to present its budget, with clamour for promised reforms growing.

The Economic Survey 2015-16 said Friday India stands out as a “haven of stability” and an “outpost of opportunity” amid the global turmoil and projected growth at between seven to 7.75 per cent in 2016-17.

– Growth in the services sector moderated slightly but remains robust.

Fisheries constitute about 1 % of the GDP of the country and 5.08 per cent of agriculture GDP.

The Economic Survey also said the government probably succeeded in reducing its fiscal deficit to 3.9 per cent of GDP in 2015-16 as economists expect.

Yet, with 7-7.75 per cent growth India will be the fastest growing major economy in 2016-17.

The Survey said the increase in wages and benefits recommended by the 7th Pay Commission is not likely to destabilise prices and will have little impact on inflation.

Another alternative to fiscal consolidation would be to reduce subsidies to the well-off amounting to about Rs. 1 lakh crore by better targeting subsides to the poor, stated the Survey. “State fiscal deficits are already poised to widen, and there is no fiscal space”, Abhishek Upadhyay, aneconomist at ICIC Securities, told Reuters.

However, infrastructure has not been kept in the first volume of the economic survey as was the case a year ago.

That should bring some relief for Jaitley, who has faced flak for being unable to convincingly turn around the economy in the last 20 months.

But beyond this, the situation looks tricky. A normal monsoon will also boost spending, the survey added.

The total subsidy bill as a proportion of GDP is expected to be below two percent of GDP as per budget estimates for 2015-16. “It is not going to happen through some magic wave of the wand”, he said. Again, it is global slowdown that will keep inflation benign.

The report, written by economic adviser Arvind Subramanian, said that “credibility and optimality” argued in favour of sticking to next year’s deficit target of 3.5 percent of GDP but left room for an upward revision.

It means the 3 per cent deficit target will be met by March 2021, instead of FY18. The RBI anchored its policy rate to achieve the domestic inflation targets consistant with growth.

Meanwhile, there is unlikely to be a revival in exports, which fell for a fourteenth straight month in February, anytime soon. Also, Prime Minister Shri Narendra Modi played a leading role at COP 21 in the launch of the International Solar Alliance (ISA), and also volunteered to host its Secretariat.

The Survey said some of the initiatives taken by the government to improve the performance of ports are deepening draft to 18 metres to handle large and modern vessels, establishing dry ports at the Jawaharlal Nehru Port Trust and Kandla and providing financial assistance to help them procure pollution response equipment. However, with multifaceted measures from the government to foster industry and enterprises, investment-led growth should return.