FICCI forecasts 7.7% GDP growth for Indian economy in FY17

31 May '16

3 min read

The results of latest round of the Federation on Indian Chambers of Commerce and Industry's (FICCI's) Economic Outlook Survey puts across a median GDP growth forecast of 7.7 per cent for the 2016-17 fiscal.

The FICCI's projection is marginally higher than the International Monetary Fund's forecast of 7.5 per cent for India's GDP growth for 2016-17.

The growth in 2016-17 is expected to be supported by an improvement in the agricultural and industrial sector performance. Prediction of a good monsoon after two consecutive years of sub-optimal rainfall backs the improved outlook in the current fiscal.

According to the survey results, agriculture sector is expected to record a median growth of 2.8 per cent in 2016-17, with a minimum and maximum range of 1.6 per cent and 3.5 per cent respectively. Industrial growth is anticipated to grow by 7.1 per cent in 2016-17, while services sector growth is estimated at 9.6 per cent.

The survey was conducted during April/May 2016 by economists belonging to the industry, banking and financial services sector. The economists were asked to provide forecast for key macro-economic variables for the year 2016-17 as well as for Q4 (January-March) FY16 and Q1 (April-June) FY17.

The median growth forecast for IIP has been put at 3.5 per cent for the year 2016-17, with a minimum and maximum range of 3 per cent and 4.5 per cent respectively.

The outlook of the participating economists on inflation remained moderate. The median forecast for Wholesale Price Index based inflation rate for 2016-17 has been put at 2.2 per cent, with a minimum and maximum range of (-)1.3 per cent and 2.9 per cent respectively. The Consumer Price Index has a median forecast of 5.1 per cent for 2016-17, with a minimum and maximum range of 4.5 per cent and 5.5 per cent respectively.

A majority of the participating economists believe that the fiscal deficit target for the year 2016-17 seems achievable. It was pointed out that some of the enabling factors would include expectation of a normal rainfall, improved buoyancy in domestic growth leading to higher revenue collection through direct and indirect tax collections and government continuing with subsidy rationalisation. However, it was also pointed out that it would be important to realize the non-tax revenue target for achieving the targeted fiscal deficit to GDP ratio.

Realising the targeted receipts from disinvestment and spectrum sales would be a critical factor. Furthermore, it was mentioned that the economy will have to achieve a GDP growth rate between 7 to 7.75 per cent this fiscal year (as also projected in the Economic Survey) to be able to garner the requisite amount of revenue receipts.

The economists pointed out that risk could arise from an increase in global crude oil prices and this could possibly change the projected trajectory of fiscal deficit this year. A few economists also pointed out that continuing productive capital expenditure like infrastructure will be important as that will remain a major driving factor to push the economy forward.

According to the FICCI survey, while the government and the RBI are working together to address the issues of recovery of the banking system, recovery will take time. A turnaround in this fiscal year looks unlikely and an improvement in numbers would not come until next financial year. (SH)

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