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Govt lowers GDP forecast in mid-year review
19
Dec '15
In a mid-year economic review, the government has lowered the GDP growth forecast for the current financial year to 7-7.5 per cent from the previously predicted 8.1-8.5 per cent after the economy grew at 7.2 per cent in the first half of the 2015/16 fiscal

The revised target is mainly because deficit rains have led to lower agricultural output. Still, if it meets the government's estimate, India will remain the world's fastest growing major economy as China's GDP is struggling to maintain the near-7 per cent growth.

The latest GDP forecast, given in the Mid-Year Economic Review of the Economy tabled in Parliament, is broadly in line with 7.4 per cent growth projected by the Reserve Bank of India. The report warned that growth in 2016/17 is unlikely to be significantly higher.

Authored by the Government's chief economic adviser Arvind Subramanian, the report said retail inflation was likely to be within the target of about 6 per cent.

Slowing demand for Indian merchandise in overseas markets has hit growth as exports, that account for about a fifth of India's $2 trillion economy, have fallen for the past 12 months.

"Declining exports seem to be predominantly determined by a decline in the world demand," the report said. "Regardless of the causes, the effect has been a drag on growth."

It also said the government faces a challenge in meeting its budgeted fiscal deficit target of 3.9 per cent because of the decline in nominal GDP.

In his budget in February, Finance Minister Arun Jaitley had pledged to narrow the deficit to 3.9 per cent of GDP in this fiscal year from 4 per cent in 2014/15.

“Slower than anticipated nominal GDP growth will itself raise the deficit target by 0.2 per cent of GDP,” the report said, adding that “the anticipated shortfall in disinvestment receipts, owing to adverse market conditions for a portfolio that largely comprises commodity stocks, will add to the challenge.” (SH)

Fibre2Fashion News Desk – India

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