 "Labourers work at the construction site of a bridge being built for metro rail in New Delhi (pic: Reuters)")
If there was any optimism about an uptick in India’s growth prospects in the coming fiscal, it has been dashed by the Economic Survey tabled today in Parliament.
The Survey, which projects GDP to grow at 7-7.5% in the coming fiscal year, is in line with expectations of growth in the current year. What this means is that far from growth edging upwards, the underlying drivers of growth continue to be weak despite both fiscal and monetary stimuli.
Read our full coverage on Union Budget 2016
These numbers are perhaps the first official acknowledgment of the precarious position of the Indian economy. One should add that the forecast is conditional upon a rebound in agricultural growth and the absence of any international crisis that might prompt a further slowdown in GDP growth - and it is clear that on both counts a uphill battle awaits.
The projections could come undone if, as Chief Economic Advisor Arvind Subramanian points out, oil prices head northwards. Add to this the uncertainty over global growth and the prospects for the Indian economy don’t look that bright.
Considering that developed economies like Japan and the Euro Zone have now embarked on unconventional monetary policies like negative interest rates, the possibility of the US joining them, and the outlook for world trade, India’s exports seem shaky. If global demand falls, India’s exports, which have already contracted 12 months in a row, could be hit further. This would negatively impact growth in the manufacturing sector which would pull down growth even more.
Growth in emerging markets too has slowed down. As per a recent report in the Financial Times, "Weaker demand from emerging markets made 2015 the worst year for world trade since the aftermath of the global financial crisis, highlighting rising fears about the health of the global economy."
