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Economic Survey 2018: Exports to boost GDP growth in FY19 to 7-7.5%

If this turns out to be true, growth will be in the lower end of what the previous year's Economic Survey predicted at 6.75-7.5%

Ishan Bakshi  |  New Delhi 

India's market cap to GDP nears 100%

The is likely to grow at 7-7.5 per cent in 2018-19, reinstating the country as the fastest-growing economy in the world, said the Economic Survey 2017-18. The range is in sync with what the International Monetary Fund (IMF) and the predicted at 7.4 per cent and 7.2 per cent, respectively.

For the current financial year (FY18), the survey expected growth to touch 6.75 per cent, higher than the Central Statistics Office’s first Advance Estimates of 6.5 per cent. If this turns out to be true, growth will be in the lower end of what the previous year’s Economic Survey predicted at 6.75-7.5 per cent.

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Of the four principal drivers of growth, may well turn out to be main driver of growth in FY19, suggested the survey. And while on consumption demand, the outlook for remains muddled, the survey is optimistic about the revival of private capital expenditure cycle.

The recent revival in global demand has spurred from emerging markets, especially Asian economies. But India’s have lagged that of other emerging markets. However, the survey remains optimistic about the country’s prospects.

“The acceleration of global growth should in principle provide a solid boost to export demand,” notes the survey. could add another 0.5 percentage points to growth, it adds. This is conditional upon two factors - one, if the relationship between India’s and world growth returns to that in the boom phase of the mid-2000s and two, if the world economy grows at 3.9 per cent as predicted by the

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Economic Survey 2018: Exports to boost GDP growth in FY19 to 7-7.5%

On a revival in private investments, the survey is optimistic, pointing out that “many of the factors exerting a drag on growth over the past year are finally easing off.” But an investment revival is conditional upon a quick resolution of bad debts. If stressed firms are “put in the hands of stronger ownership, allowing them to resume spending,” it could lead to an investment revival. A delay in resolution though will delay investment revival.

The outlook for consumption demand is a bit uncertain. On the one hand, private consumption demand is likely to benefit for a likely reduction in real interest rates in 2018-19, compared to the 2017-18 average.

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On the other side, it is likely to be hemmed by higher The has predicted average in 2018-19 to be about 12 per cent higher. Now, assuming that the government does not offset the price rise by reducing taxes, higher will lower real incomes and thus, restrict household consumption. Further, higher oil prices, by spurring inflation, will necessitate a tighter monetary policy.

As the survey notes: “Persistently high (at current levels) remain a key risk. They would affect inflation, the current account, the fiscal position and growth, and force macroeconomic policies to be tighter than otherwise.”

First Published: Mon, January 29 2018. 22:37 IST