Volume 2 admits to growth slowdown from pre-Budget projections, say analysts
India Inc and analysts said that the second volume of the Economic Survey for 2017 has correctly and candidly assessed that the Indian economy is being weighed down by a series of deflationary impulses due to looming twin balance sheet challenge and declining profitability in certain sectors.
Chandrajit Banerjee, Director-General, CII, said, it has rightly described the current economic outlook as a combination of optimism and anxiety.
“Structural reforms and measures to address the twin balance sheet problem have accelerated while the macro-economic environment continues to remain stable.
“The Survey has elaborated on the key benefits of GST,….at the same time, CII agrees with the Survey’s assessment that factors such as agricultural stress, exchange rate appreciation and sector-specific issues will impinge on the short-term outlook for the economy,” he added.
Assocham Secretary-General DS Rawat said the Survey has rightly pin-pointed the moderation in growth in industrial output and the services sector.
“Both these sectors need some immediate steps like resolution of the bank NPAs and a pragmatic approach for the ‘twin balance sheet” problem’,” he added.
FICCI said, “Our reading of the Economic Survey confirms that there is a need to substantially cut down the policy rates by the RBI and ensure its full transmission by banks in the form of lower lending rates for consumption and investment activities.”
Analysts pointed out that the Survey admits growth slowdown from its pre-Budget projections.
DK Srivastava, Chief Policy Advisor, EY India, said, “The mid-term review’s admission of a growth slowdown from the pre-Budget Economic Survey projection of an average growth exceeding 7 per cent is candid and realistic.
“Apart from two consecutive although short-term impacts emanating from demonetisation and the GST, the economy continues to suffer from deficient investment and export demand, appreciating rupee, macro implications from farm loan wavers in addition to sectoral problems in the power and telecommunication sectors.
“These are expected to weigh down India’s growth pulse in the short run.
“We should reach closer to our potential growth exceeding 7.5 per cent in Financial Year 2019”.
Sunil Kumar Sinha, Principal Economist, India Ratings & Research, however, believes that the Survey fails to provide an answer to the key question about how much time will it take for India’s GDP to realise its potential.
“India Ratings believes it fails to provide an answer to the burning question that despite growing macro-economic stability and various policy initiatives taken by the government, how long will it take for India’s GDP growth to realize its potential?
“Also the narrative still has not moved away from policy rate cut to admitting that fixing the problem of real sectors is equally important as investment revival is not a one way street.
“Moreover, no matter how much one may wish, India Ratings believes policies to fix the real sector problem will have both – hits and misses and therefore it will take its own time to play out,” he added.