Various global institutions and rating agencies have scaled down India’s economic growth projections in the past one year.
The last Economic Survey (presented in Parliament on January 29, 2018) had projected growth to be in the range of 7-7.75 per cent, while various agencies had projected it to be in the range of 7.3-7.5. However, it was subsequently revised downwards to 7.2 per cent and finally seven per cent by the Central Statistics Office.
One of the reasons could be lower growth quarter after quarter. Growth rate in first quarter (April-June) of 2018-19 was 8 per cent, which came down to 7 per cent during the July-September quarter and then to 6.6 per cent in the October-December quarter. The fourth quarter number will be out on May 31 and the picture does not seem to be very encouraging.
The Department of Economic Affairs’ monthly report for March said that the fiscal deficit of the Central government has been gliding down to the FRBM (Fiscal Responsibility and Budget Management) target. It may be noted that the Narendra Modi-led government had upped the fiscal deficit target a tad in the Interim Budget to 3.4 per cent for 2018-19 and same during 2019-20. It was said that had there not been provision for income support to the farmers, the deficit would have been 3.3 per cent for 2018-19 and 3.1 per cent for 2019-20.
The report acknowledged the fact that monetary policy has attempted to provide a fillip to the growth impulse through cuts in repo rate and easing of bank liquidity. The room for this monetary easing has been created by low inflation in 2018-19, although it has started to inch up in the last few months of the year.
“The real effective exchange rate has appreciated in the fourth quarter of 2018-19 and could pose challenges to the revival of exports in the near future,” it said adding that increase in foreign exchange reserves in the fourth quarter, on account of improvement in trade balance, has increased the import cover for the economy.