Friday, February 27

Economic Survey: GDP to grow between 8.1-8.5% in FY 15-16

Image Courtsey: Financial Express
The Economic Survey, tabled by Finance Minister Arun Jaitley in Parliament today, a day ahead of the Union Budget, expects the economy to grow by over 8 per cent under a new calculation method that makes India the world's top-growing big economy.

Detailed Economic Survey Report of India - 2014-15 as tabled in Parliament (Click Here)


Faster growth will make big bang reforms possible in the coming years, the survey, considered a report card of the economy, has said. It was prepared by the finance ministry's chief economic adviser Arvind Subramanian.

"India has reached a sweet spot - rare in the history of nations - in which it could be launched on a double digit medium-term growth trajectory which would allow the country to attain the fundamental objectives of "wiping every tear from every eye," the report notes adding that "there is a scope for Big Bang reforms now."

It forecasts that the economy will grow by 8.1-8.5 per cent in the fiscal year 2015-16.

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"It basically says the economy is now poised to take off, with key enablers getting into place," said Shubhada Rao, chief economist of Yes Bank in a quick reaction.

The Economic Survey has highlighted the Narendra Modi government's commitment to fiscal consolidation and has vowed to contain India's fiscal deficit for 2014-15 at 4.1 per cent.

Economists are optimistic that Mr Jaitley will be able to stick to the deficit target because of lower oil subsidy.

"We expect the Union Budget to maintain a similar underlying theme. We are looking at fiscal deficit projection of 3.6 percent for FY16," said Ms Rao.

Importantly, the survey highlights that tax estimates of the government have been over-estimated and that there is a need to increase revenue generation. This could dampen expectations that Mr Jaitley will announce a number of tax sops in his budget tomorrow.

The survey highlighted that there is scope for monetary easing from the Reserve Bank, with inflation showing declining trend. RBI chief Raghuram Rajan, who made a surprise rate cut in last month, has said that the central bank will keep an eye on inflation and the government's fiscal policy to decide on further monetary easing.

The current account deficit for FY15 is estimated at 1.3 per cent of GDP, which is in line with the RBI's estimates. The survey suggested removal of restrictions on gold imports. In comparison, the current account deficit had hit a record 4.8 per cent in 2013-14 which led to imposition of higher import duty on gold.

The survey suggests easing of restrictions on gold imports. The survey lists major reform initiatives undertaken by the government.


Sources:
1. NDTV
2. Reuters
3. Financial Express

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