Analysts sceptical about achievability of Survey targets

Analysts have welcomed the Economic Survey pointing to the strengthening of the macroeconomic fundamentals, even as some expressed scepticism on achieving its growth targets spelt out in the annual document.

Economists at CARE Ratings said the findings indicate “an improvement in the macroeconomic fundamentals of the nation, which is reflected both in temporal and cross-country comparisons”. The Survey reflects a much larger fiscal headroom becoming available to the government on account of expected pick-up in growth, lower oil prices and better targeting of subsidies, PwC India partner for public finances, Ranen Banerjee, said.

However, rival consultancy firm EY India’s Chief Policy Advisor D K Srivastava sounded skeptical on growth, saying lower tax collections will hamper the public investment assumptions.

“The Survey’s growth optimism is less convincing. It would require an increase in the investment rate of four to five percentage points of GDP (gross domestic product),” he said.

The tone of the Survey document is “cautious” and this is a signal that “a dramatic Budget with big-bang reforms is not envisaged”, consultancy Grant Thornton said.

KPMG India’s Jaijit Bhattacharya termed the eight per cent growth target for the next financial year as “audacious” but achievable because of the new way of computing GDP numbers.

He said the move to borrow only to invest in capital expenditure is very good as it will inculcate the fiscal discipline.

On the Survey’s comment to push the forex reserves up to $1 trillion, he said it would be better to quantify it in terms of months of forex exposure that the country would have, including imports and repayments.

American brokerage Citigroup Global Research said the Survey’s projection of double digit growth trajectory looked ambitious but possible.

“Double-digit growth appears ambitious. However, in addition to ongoing reforms, the government has launched wide-ranging economic-social programmes like the Jan Dhan, Swachh Bharat, ‘Make in India’ and Digital India schemes.

“Combined, we believe they should boost GDP by one-two per cent, reduce CAD by 50-75 bps, bolster savings rate by one-two per cent, reduce fiscal by 0.5-0.75 per cent,” the report said.

Japanese brokerage Nomura said the key takeaway is that while the government could adopt a fiscal rule and stick to medium-term fiscal consolidation, it could veer from the fiscal deficit target.

“While the government could adopt a fiscal rule (over a business cycle) and will stick to medium-term fiscal consolidation, there is a risk that it could deviate from the 3.6 per cent of GDP fiscal deficit target previously indicated for FY16, possibly targeting 3.8-3.9 per cent of GDP instead,” it said.