Chief Economic Adviser Arvind Subramanian is a lot less optimistic about the Indian economy if the forecasts made in the three Economic Surveys he has presented so far are read together, even though he feels that a combination of measures such as implementation of the goods and services tax, long term benefits of demonetisation and tax reforms will allow growth to return to trend in 2017-18.

In the first survey he put together with a team of economists at the Department of Economic Affairs in the Finance Ministry about three years ago, Subramanian projected India would expand 8- 8.1 per cent in 2015-16. That’s because he read that India was in a sweet spot “in which it could finally be launched on a double-digit medium-term growth trajectory”. Revised estimates of growth published by the Central Statistical Office on Tuesday pegs it at 7.9 per cent.

In the Survey for the following year, Mr Subramanian was more tempered in his growth projection for 2016-17. The survey said: “For now, but not indefinitely, the sweet spot created by a strong political mandate but, recalibrated to take account of a weaker external environment, is still beckoningly there.” The economy was expected to expand by 7-7.75 per cent growth in 2016-17, with downside risks because the world economy remained weak.

The Central Statistical Office in its advance estimates of growth for the current fiscal has said growth would be about 7.1 per cent, but that estimate does not consider the disruption caused to the domestic economy by the demonetisation of the Rs 500 and Rs 1,000 bank notes.

In the survey for 2016-17 published along with projections for 2017-18, Subramanian notes some impact would be felt on the growth. He estimates the impact to be “0.25 percentage point to 0.50 percentage point reduction in real GDP growth relative to the baseline of estimate of about 7 percent”. Essentially that would mean, Indian economy may expand about 6.5-6.75 per cent in the current fiscal year.

As for growth for 2017-18, Subramanian has forecast real GDP would expand between 6.75 per cent and 7.5 per cent. While this is lower than the projection made for the 2016-17 in the Survey last year, it would be higher than the actual expansion expected in the current fiscal year. However, there are three downside risks to the forecast, the Survey notes. These risks are lingering effects of demonetisation on supplies of agriculture produce, geopolitical situation that could lead to oil prices flaring and possible eruption of trade tensions amongst the major countries, triggered by geo-politics or currency movements.

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