Recovery will lift growth to 7-7.5%

Recovery will lift growth to 7-7.5%

Context

The economy is set to grow at 7-7.5% in the next financial year on the back of reviving exports and investment even as the negative effects of demonetisation and the teething troubles of the Goods and Services Tax recede, Chief Economic Advisor Arvind Subramanian said in the Economic Survey 2018.

Economic Survey says effects of note ban, GST have receded. Sounds a note of caution on rising oil prices, stock marketsCalls for medium term focus on education and agriculture

The Survey, tabled in Parliament by Finance Minister further predicted that GDP growth in the current financial year would touch 6.75%, higher than the 6.5% estimated by the Central Statistics Office.

For more reforms

I&B Code and Recapitalisation measures for PSBs to boost economic growth

Looking ahead, it said reform measures like the implementation of the Insolvency and Bankruptcy Code and the recapitalisation plan for public sector banks would go a long way in addressing the twin balance sheet problem afflicting both corporates and banks, which would in turn further boost economic growth.

India to again become the fastest growing economy

“This should allow real GDP growth to reach 6.75% for the year as a whole, rising to 7-7.5% in 2018-19, thereby re-instating India as the world’s fastest growing major economy,” it said.

Oil-inflation link

Mr Subramanian said that a $10 per barrel increase in oil prices results in a slowdown in GDP growth by 0.2-0.4%, and a rise in inflation of 0.3-0.4%.

Policy actions needed

These include completing the reforms needed to effectively address the ailing balance sheets of corporates and banks, and finalising the privatisation of Air India.

Focus areas for medium term

In the medium term, the Survey highlighted three areas that would require a policy focus including:

Employment, education, and agriculture