Ind-Ra revises up India's growth estimate to 7.8%
23/08/2016 12:46
With the exception of East and Northeast, the rainfall in other regions of the country has been more than long period average, according to Ind-Ra report.
With a favourable monsoon so far, Ind-Ra expects rural demand to recover in FY17. This coupled with urban demand, which will be aided the Seventh Central Pay Commission payout, will give a fillip to the consumption demand in the economy. Ind-Ra expects consumption demand to grow at 8.4 per cent in FY17. However, industrial growth at 7.2 per cent in FY17 will still be lower than the 7.4 per cent witnessed in FY16.
The key factor that is holding the acceleration of industrial growth is investment recovery. The incumbent government has taken several initiatives. For example, to encourage manufacturing activity there has been a concerted focus on improving the ease of doing business through programmes such as Make in India, Start Up India etc.
Similarly, to address the power sector woes, it has introduced the Ujwal DISCOM Assurance Yojana (UDAY) scheme and to address the woes of other sectors such as metals, mining, road and oil & gas etc. it has introduced debt restructuring schemes. However, all this has failed to rekindle the animal spirit in the economy so far.
In fact, the debt-fuelled investment boom that began during FY10-FY11 has taken a heavy toll on the financial health of both corporates and banking sector. As a result, both are repairing their balance sheets. Another factor that is holding up investments is low capacity utilisation rates in a number of manufacturing sectors due to both tepid domestic demand and global overcapacity in sectors such as steel, tyre etc.
Despite a bit rusty fiscal arithmetic, Ind-Ra expects that the union government will still be able to achieve its fiscal deficit to the GDP target of 3.5 per cent in FY17.
