NEW DELHI: The Indian economy is expected to grow by 7.9 percent in the next fiscal and may progress at a similar pace over a couple of years extending beyond 2019, India Ratings & Research (Ind-Ra) said today.
"Ind-Ra expects the gross domestic product (GDP) to expand at 7.9 percent in 2016-17 compared with 7.4 percent in 2015-16."
"After bottoming out in 2012-13, it believes the GDP so far has followed a steady growth trajectory and is expected to do so even in the medium term", the agency said in its yearly growth projection outlook.
It added that the various macro parameters show that India has and is likely to perform better than its peers in the near term.
"India still remains a growth story. The population dynamics is extremely favorable for India. Even though the consumption demand is seen up, investment demand is still slow. Most of the investment growth is largely by government.
"This is something that will have to be continued. While, the private investment is likely to remain sluggish in next couple of years", said Sunil Sinha, Principal Economist, India Ratings.
He said that even in the next five years or so, the GDP growth is likely to hover around this level of sub-8 percent and can surpass it only if the host of policy initiatives taken by the new government actually show results.
Ind-Ra expects the agriculture sector to grow at 2.2 percent in 2016-17, services sector at 9.5 percent and industrial sector at 7.6 percent.
As things stand now on the domestic front - inflation is low, rupee is stable and fiscal and current account deficits are no longer a threat. But on the global front, recovery is still uneven and fragile, it said.
"Against this backdrop, Ind-Ra believes domestic demand will remain the key driver of India's GDP growth in 2016-17. Consumer sentiments which were hit by a high and stubborn inflation over the last few years, though still subdued, are gradually recovering.
"Ind-Ra expects this process to gather pace in 2016-17 in view of the 125 basis points (or 1.25 percent) cut in repo by RBI in 2015", it added.
"The global trade has almost collapsed and the global trade talks have not reached the way as expected. (India's) exports will remain sluggish", said Sinha.
The agency expects fiscal deficit to remain at around 4.1 percent of the GDP in the current fiscal, higher than government's target to reduce it to 3.9 percent.
"To achieve the 3.9 percent fiscal deficit target, fiscal deficit will have to be compressed... this can be achieved by deferring parts of subsidy payments to 2016-17, cutting down capital expenditure or a combination of both."
Besides, the implementation of 7th Central Pay Commission will have bearing on the fiscal front, Sinha said.
"Cutting down capital expenditure, when the need is to step up government investment, will be counter-productive. Ind-Ra expects the fiscal deficit of FY17 to come in at 3.9 percent of GDP", said the agency.
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