Economic Survey pegs FY18 GDP growth at 6.75-7.5%
New Delhi: In a pointer to what could be expected in the Budget, the Economic Survey on Tuesday projected India's economic growth at 6.75-7.5 per cent during FY18 as compared with 7.1 per cent advance estimate of the CSO, as the adverse impact of demonetisation, high oil prices and trade protectionism pose major risks.
The rise of protectionism after Donald Trump became the US president may weigh on FY18 growth prospects, said the pre-budget survey tabled by Finance Minister Arun Jaitley in Lok Sabha.
The government expects interest rates to soften due to the flood of liquidity after the note ban. However, a sharp rise in oil prices during FY18 may limit room for RBI to ease monetary stance, it said.
"Economic growth expected to return to normal as new currency notes in required quantities come back into circulation," it said.
Even at the projected growth rate, India will be among the fastest growing economies in the world, the survey said.
The Survey said there was a need to seriously consider Universal Basic Income idea.
Earlier, the Central Statistical Office said India's economic growth is projected at 7.1 per cent during FY17 as compared with 7.6 per cent in FY16, increasing the suspense over the impact of demonetisation on the country during the second half.
CSO estimated manufacturing sector is projected to grow 7.4 per cent in FY17, slower than 9.3 per cent in FY16 while mining is expected to contract 1.8 per cent, electricity 6.5 per cent and construction 2.9 per cent. Agriculture growth is expected to accelerate to 4.1 per cent FY17 as against per cent 1.2 in FY16.
Among services, trade, hotels, transport are likely to grow 6 per cent while financial services may grow 9 per cent and public administration and defence 12.8 per cent in FY17.
The still robust GDP growth estimate diminishes chances of a sharp rate cut by the Reserve Bank of India even though consumer price inflation (CPI) eased to 2-year low of 3.63 per cent in November.
The economic growth prospects have been dimmed after Prime Minister Narendra Modi unleashed the bold move to scrap Rs 500 and Rs 1,000 notes from November 9, followed by tardy implementation and increasing hardship of cash-starved Indians.
Analysts have started pegging down India's GDP growth projection to as low as 3.5 per cent for FY17 as the note ban crimps consumption and tax terrorism scares away investors.
The RBI's Financial Stability Report has warned that growth in terms of GVA could fall to 7 per cent in FY17 under baseline scenario and then rebound to 7.9 per cent in FY18. Under "medium" stress scenario, the growth is pegged at 5.4 per cent each in FY17 and FY18. However, the growth could slide to as low as 3.5 per cent in FY17 under a severe stress situation and 3.1 per cent in FY18.
In his December monetary policy review, the RBI paused on rates as it expects inflation to stay within 5 per cent in FY17 but economic growth measured in terms of gross value added (GVA) to slow to 7.1 per cent from 7.6 per cent estimated earlier due to the impact of demonetisation. India's GDP grew at 7.6 per cent in FY16, which put the country at the top of the charts among major emerging economies beating China.
RBI has lower rates by 175 bps since 2015 while the government stepped up spending and speeded up reforms to keep the growth momentum up.