Ahead of the Union Budget, the Economic Survey on Friday termed external environment as challenging but projected a 7-7.5 per cent GDP growth rate in the next fiscal which could accelerate to eight per cent in a couple of years.
The Economic Survey for 2015-16, which was tabled in Parliament today, also made a case for carrying forward the reform process to achieve macroeconomic stability.
Inspite of challenges and lower than projected GDP growth rate during 2015-16, “the fiscal deficit target of 3.9 per cent of GDP seems achievable.”
After a 7.2 per cent economic growth in 2014-15, it said the expansion in economy will be 7.6 per cent in the current fiscal, the fastest in the world.
However, it cautioned that if the world economy remained weak, India’s growth will face considerable headwinds.
On the domestic side, two factors can boost consumption, increased spending from higher wages and allowances of government workers if the 7th Pay Commission is implemented and return of normal monsoon.
At the same time, the Survey enumerated three downside risks — turmoil in global economy could worsen the outlook of exports, contrary to expectations oil price rise would increase the drag from consumption and the most serious risk is the combination of these two factors.
“One of the most critical shortterm challenges confronting the Indian economy is the twin balance sheet problem — the impaired financial positions of the public sector banks and some corporate houses. The twin balance sheet challenge is the major impediment to private investment and a fullfledged economic recovery,” the Survey said.
Source: Press Information Bureau
Stock markets resilient
Indian stocks are relatively resilient despite volatility in the worldwide financial markets and the country can become a leading investment destination going ahead, said the Economic Survey.
“The (Indian) market has rebounded time and time again, and it is hoped that as the global financial markets settle down, India can become the leading investment destination owing to its robust macroeconomic fundamentals,” as per the 2015—16 report card of the state of the economy tabled by Finance Minister Arun Jaitley in Parliament on Friday.
“Despite volatility in global financial markets, the Indian equity market has been relatively resilient during this period compared to the other major emerging market economies,” it added.
The Survey also said that the average borrowings by banks have increased significantly in the immediate aftermath of US fed rate hike, resulting in appreciation of the rupee.
However, subsequent to easing of liquidity conditions, the rupee started depreciating.
On trends witnessed in capital markets, the Survey said that during the fiscal 2015-16 till December the resource mobilisation through the public and right issues has surged rapidly as compared to the last financial year.
During this period, 71 companies raised Rs. 51,311 crore from the capital market compared to Rs. 11,581 crore during the corresponding period of 2014-15. Fund garnered by mutual funds also increased substantially to Rs. 1,61,696 crore from Rs. 87,942 crore.
During 2015-16 so far, the Indian equity market has remained subdued. The BSE’s benchmark Sensex declined by 8.5 per cent (till January 5, 2016) over March 2015, mainly on account of turmoil in global equity markets.
The net investment by Foreign Portfolio Investors (FPIs) in the Indian market was at Rs. 63,663 crore in 2015 as compared to Rs. 2,56,213 crore in 2014.