MUMBAI (Reuters) - India's economy is expected to grow 7-7.5 percent in the fiscal year to March 2017, the Economic Survey said on Friday, ahead of the presentation of the annual budget by Finance Minister Arun Jaitley on Monday.
COMMENTARY
RADHIKA RAO, ECONOMIST, DBS BANK, SINGAPORE
"The economic survey has adopted a cautious tone on the economic assumptions, near and medium-term.
"By extension, realism in nominal growth projections bodes well for credibility on budgetary assumptions (primarily deficit, tax buoyancy etc).
"A benign inflation estimate is, however, puzzling ahead of pay commission changes and is perhaps an indication that the housing allowance increase might be staggered/postponed.
"Re-think of the fiscal framework is likely, which suggests the 3 percent target for FY18 is likely to be pushed out. However subsequent comments on need for "credibility and optimally" on FY17 deficit raises the possibility that the -3.5 percent red line might be adhered to on Monday.
"If this pans out, the underlying math will be important to provide confidence to the markets. We would be cautious if the pay commission proposals and bank recap needs are still adopted completely, but no net impact is shown on the headline deficit."
ABHISHEK UPADHYAY, ECONOMIST, ICICI SECURITIES PRIMARY DEALERSHIP, MUMBAI
"Growth assumptions look fine, may be even a tad conservative under the assumption of "normal" monsoons, as does the projection for the CAD (current account deficit) to stay contained.
"The problem in the external accounts continues to be more on the capital account, rather than current account. That is where focus on macro-stability is important.
"The survey signals that government may adhere to 3.9 percent fiscal deficit target for FY16, but I do not share the belief that there is scope to review the medium term fiscal consolidation framework.
"State fiscal deficits are already poised to widen, and there is no fiscal space. A review of the roadmap should also limit scope for monetary accommodation.
"Inflation projections seem optimistic, given the stickiness seen in core inflation, and the impact of pay commission linked wage hikes on CPI, which may continue to seep into the index as states also implement the pay hikes."
(Reporting by Mumbai newsroom; Compiled by Rafael Nam)
