Before this year’s budget, the Economic Survey had suggested that economic management would be challenging in the coming year.
Amid the negative sentiment because of frauds reported by the country’s state-owned banks, comes the release of the latest economic data by the government’s statistics office or the CSO. It may help dispel some of the gloom for now. The CSO’s second advance estimates show that GDP grew 7.2 per cent in the October to December quarter in 2017, higher than what many forecasters expected, while growth in the second quarter, July to September, was revised to 6.5 per cent, an indication of an uptick in the year ahead and a nascent recovery in sight. Clearly, the next quarter should be better given the low base effect and with a pick-up in exports and decent corporate earnings reflecting improved demand and higher spending and perhaps the fact that the industry has shrugged off the lingering effects of GST and demonetisation.
All this may be seen as a reaffirmation of an upward trend in growth in the next fiscal with agencies such as the IMF and the World Bank besides the RBI, credit rating agencies and other forecasters, estimating that India could grow at well over 7.2 per cent in 2018-19. While the third quarter numbers indeed look better, it is important to view it in the context of a more closely watched indicator — the Gross Value Added or GVA of 6.7 per cent or the GDP at factor cost. But unfortunately, what all these do not take into account is a weakening fisc and a budget which dampened enthusiasm. When the micro picture looks promising, with companies in quite a few sectors reporting better numbers and with the latest report indicating a growth of 6.7 per cent in eight core infrastructure sectors, it is not just the pause in fiscal consolidation which is worrying, with the fiscal deficit now pegged at 3.5 per cent in FY 18 against 3.2 per cent earlier, but also the mess in the banking sector. Surely that is bound to weigh on growth and dent confidence, especially with the government and the probe agencies appearing to go overboard after successive reports of frauds and wrongdoing in many banks.
Before this year’s budget, the Economic Survey
had suggested that economic management would be challenging in the coming year. That assessment came well before what has unfurled so far in the banking sector. How quickly the government now gets down to addressing this will make all the difference.
via A cautious hope | The Indian Express