India sees above seven per cent growth

New Delhi, February 26

India today offered a cautious forecast for economic growth to exceed seven per cent in the next financial year, as the government prepares to present its budget, with clamour for promised reforms growing.

The Economic Survey, a yearly report released by the finance ministry ahead of the national budget on Monday, said gross domestic product would expand between seven and 7.75 per cent in 2016-17.

The relatively upbeat prediction comes despite a weak global economy, with a slowdown in China that has worried investors, other major emerging markets in recession and sinking global stocks.

India’s GDP likely grew 7.6 per cent over the 2015-16 financial year, the government said, making it the world’s fastest-growing major economy.

However, today’s forecast represents a paring back of expectations from last year’s survey which predicted growth would top eight per cent this year.

“We’ve learnt from the experience of last year. The forecast for last year went wrong, maybe it was over-optimistic,” said Arvind Subramanian, the government’s chief economic adviser.

Last year’s survey did not anticipate how much weak global demand would hurt India’s exports, nor the impact of a second bad monsoon on its vast agricultural sector, he said.

“This year’s assessment is really based on looking out at the external environment which seems to be very grim. It’s possible we will do better than this year, it’s possible we won’t,” Subramanian said.

PM Narendra Modi has made it a priority to boost India’s economic growth, vital for lifting millions out of poverty, since sweeping to power in a general election in May 2014.

But investors have raised concerns about the pace of promised reforms needed to create jobs for India’s tens of millions of young people. And while its growth has outpaced that of powerhouse China in recent quarters, Asia’s third-largest economy still faces challenges.

After cooling from previously high levels, India’s once exorbitant inflation has ticked up again in past few months, with prices rising 5.7 per cent in January. India’s main stocks index has lost a fifth of its value over past year, private investment is weak and the rupee is trading at near-record lows against dollar.

The Economic Survey forecast consumer price inflation would ease to 4.5 to five per cent in 2016-17.