FinMin may lower growth forecast to under 8 per cent

A weak monsoon coupled with unpredictable trade and industrial performance has compelled the Finance Ministry to consider scaling down its growth projection for this fiscal to between 7.5 per cent and 8 per cent.

The Ministry, however, is hopeful of a higher growth trajectory of over 8 per cent from 2016-17, when the impact of higher public spending is felt.

One of the focus areas is likely to be on how to keep up the momentum of public spending while facing stresses on the financial front, said two officials working on the country’s half-yearly economic report, to be tabled in Parliament next week.

The Mid-Year Economic Review is also likely to call for continued public spending next fiscal year to prop up growth. It will also underline the challenges in fiscal consolidation because of an expected increase in commodity and fuel prices as well as additional payouts due to the Seventh Pay panel recommendations and implementation of one-rank one-pension in 2016-17.

“The projections are being worked out based on recent economic data and the corporate sector’s performance. The review is expected to be tabled in Parliament around December 20,” said the official.

The estimates in the report will be in line with the GDP data released last month, which pegged economic growth at 7.2 per cent for the first half of the fiscal year as against the Budget estimate of between 8 per cent and 8.5 per cent.

A number of international agencies have also pegged India’s GDP growth in the current fiscal year on similar lines. While Standard and Poor’s has said India will grow at 7.4 per cent, Fitch Ratings has forecast GDP growth of 7.5 per cent.

The mid-year review is also expected to identify sector-specific issues — especially in infrastructure — that continue to hamper growth, and recommend policy measures to address these challenges.

For 2015-16, the report is likely to highlight the Centre’s comfortable financial position, which will help achieve the fiscal deficit target of 3.9 per cent.

Significantly, in a break from the past year, the Finance Ministry is also likely to assess the performance of States as part of the mid-year review.

“There is a thinking that the overall performance of States should also be looked into as they are an important factor in the economic growth of the country. Already, there has been a report on the ranking of States in the ease of doing business,” said one of the officials.

The official, however, maintained that including an appraisal of the performance of States in the half-yearly economic report is still under consideration.

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