The growth projection for fiscal 2016-17 is grim as well, with the additional boost to consumption this year prompted by the decline in oil prices likely to recede by next year, the finance ministry said in its mid-year economic review.
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He said he would write to party president Amit Shah, seeking to know what specific anti-party activities he had carried out. He said he’d also assist Azad in drafting the reply to the suspension letter, adding Azad was still a party member.
Still, if it meets the government’s estimate, the South Asian nation will remain the world’s fastest growing major economy as China’s GDP is struggling to maintain the near-7% pace promised by its leaders.
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Compounding the worries for next year is the fiscal outlook, which is expected to be “challenging” in light of the impact of the Seventh Pay Commission recommendations.
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Growth has improved from 7 per cent in the first quarter of 2015-16 to 7.4 per cent in the second quarter of current fiscal year. Exports need to revive for sustainable and rapid medium-term growth, it added.
Although the report claimed the economy was showing signs of a steady recovery, it highlighted the fact that the growth drivers are only private consumption and public investment, in contrast to the boom years from FY05 to FY12 when the economy was firing on all cylinders.
Government on Friday lowered its economic growth forecast for 2015-16 to 7-7.5 per cent from 8.1-8.5 per cent, but said budget deficit target will be met as higher tax revenues offset a shortfall in stake sale of public sector units (PSU).
Further, the report also reiterated it would meet its fiscal deficit target of 3.9 percent and revenue deficit target of 2.8 percent for this year.
“If the government sticks to the path of fiscal consolidation, that would further detract from demand”.
The slowdown will pose a challenge to meeting the fiscal deficit target of 3.9 per cent of GDP and will also place a stress on tax revenue collections.
Nominal growth during this period also slowed substantially from 13.5 per cent to 7.4 per cent. The sharp and continuing decline is a cause for concern, according to a mid-year review of the economy that Union Finance Minister Arun Jaitley tabled in the Parliament. Declining global demand has hurt exports, which fell for the 12th straight month in November, down 24% from a year ago. “That’s why our debt kept coming down and everyone was reassured that our long-term fiscal position, measured by stock of debt relative to GDP, was improving all the time but now this has changed dramatically”, the government official said. The report warned that growth in 2016/17 is unlikely to be significantly higher.
The earlier growth forecast was 8.1-8.5 percent, as estimated in the Economic Survey presented in February. Private sector investment remains challenge because of legacy issues.
It said slower-than-anticipated nominal GDP growth (8.2 per cent versus budget estimate of 11.5) will itself raise the deficit target by 0.2 per cent of GDP.
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With reference to inflation, the forecast of the year ending with a retail annual overall price rise of around 6 percent was in line with the target set by the Reserve Bank of India.
