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ECONOMIC AFFAIRS

quarter and its GDP growth is likely to
be around 7.5 per cent for 2018. Also
aiding the Indian economy will be the
GDP Growth to Pick extension of global growth surge of
2017 into the new year. India, which
Up in 2018 has long tended to move in sync with
the rest of the world, was the only
major economy that didn’t accelerate
A big factor would be how oil prices move. Over the past three months, in 2017, thanks to twin effects of
crude oil prices have increased by about 28 per cent from USD 52.3 per demonetisation and GST. It is now
barrel in August-end to around USD 67 —By Ammar Zaidi expected to gain speed this year.
However, it will likely take India a
few years to return to GDP growth
With the effects of demonetisation and India’s medium-term outlook. While
levels of 7.5 per cent and above (the
the transition hiccups of the GST firmly Moody’s upgraded India’s sovereign
economy grew 7.9 per cent in the year
behind, India’s economic growth is rating by one notch to Baa2 and
ended March 2016). This because of
likely to pick up in the new year but changed its outlook to stable from
private investment – a current weak
rising oil prices and a firming inflation positive in November, World Bank gave point for growth – is likely to take time
may spoil the party. India a 30 place jump on its Ease of to improve.
MIXED ECONOMIC SCENARIO FOR
INDIA A big factor would be how oil
Some believe 2017 is best forgotten In Brief prices move. Over the past three
months, crude oil prices have increased
as the twin blows of demonetisation  India's economic growth is by about 28 per cent — from USD 52.3
and mangled Goods and Services Tax likely to pick up in the new per barrel in August-end to around USD
(GST) ripped the economy for the year. 67. Inflation too has risen to breach
most part. By some accounts, loss to
 By some accounts, loss to the target range. Higher oil prices not
GDP has been estimated to be around
GDP has been estimated to just threaten to fuel inflation, it may
2 per cent of the GDP. This translates
be around 2 per cent of the also lead to the widening of the current
into Rs 3.05 lakh crore considering
GDP. account deficit - a measure of trade
2016-17 GDP of Rs 152.51 lakh crore. and financial flows that shows how
But the worse seems to be over and  Moody's upgraded India's heavily a country relies on foreigners
there are early signs of recovery. After sovereign rating by one to finance its spending habits.
falling for five successive quarters notch to Baa2. In the immediate term, the budget
from 9 per cent in the fourth quarter of  World Bank gave India a 30
presentation on February 1 will set the
FY2015-16 to a low of 5.7 per cent in place jump on its Ease of agenda. Finance Minister Arun Jaitley
the first quarter of FY2017-18, the Doing Business ranking. will have to do some tightrope walking
GDP growth at 6.3 per cent in the July-  Economic growth bottomed as he seeks to address the challenges
September quarter of 2017-18
out after slowing to a 13- of job creation and rural distress, as well
reversed the trend.
quarter low of 5.7% in April- as concerns about fiscal slippages given
Within GDP growth numbers, a
June. the additional borrowings and GST
highly encouraging sign is that while
collections falling short of the target.
export growth has remained positive, Will he slip back into populism,
import growth has fallen. After the Doing Business ranking. “The worst is offering giveaways and subsidies in
audacious November 8, 2016, over for GDP growth. We expect
Modi government’s last full year
decision to scrap high-value currency, growth to normalise gradually over the
budget before national elections in
Prime Minister Narendra Modi’s next four to six quarters as the
2019 is a question everyone is asking?
government implemented bold reforms disruptive impact of major policy It remains to be seen how he prioritises
including rolling out GST from July 1 changes fades,” Standard Chartered the competing objectives of
and the Insolvency and Bankruptcy said in its Economic Outlook in 2018 supporting growth and achieving
Code (IBC). Also, it committed to report. macroeconomic stability. Any which
injecting sizeable capital into the While the economic growth way, the government’s hands are full.
banking sector to address the ‘twin bottomed out after slowing to a 13- It has to continue to respond to GST-
balance sheet’ issue and works towards quarter low of 5.7 per cent in April- related issues of the complex tax
improving farm incomes. June 2017, it saw growth recovering structure, higher rates and low
FAVOURABLE ECONOMIC further to 7 per cent over the next few compliance as well as ensuring
DEVELPMENTS IN INDIA quarters. Nomura says Indian progress on resolution of stressed
While these reforms brought short- economy is expected to witness a assets under the IBC and the bank
term economic pain, they have boosted sharp recovery in the January-March recapitalisation plan.
60 Competition Wizard March 2018