Getting over effects of demonetisation and GST, the Indian economic growth is expected to rise in the new year. However, high oil prices and firming inflation are looming threats. Several data analysts have estimated loss to the country to be around 2 per cent of the GDP, meaning £30.4 billion considering 2016-17 GDP of £1525.1 billion.
GDP growth after falling for five successive quarters from 9 per cent in the fourth quarter of FY2015-16 to a low of 5.7 per cent in the first quarter of FY2017-18, reversed at 6.3 per cent in the July-September quarter of 2017-18. Prime Minister Narendra Modi was bold enough to bring about reforms that have so far only brought short-term economic pain, but have boosted India's medium-term outlook. Moody's has upgraded India's sovereign rating by one notch to Baa2 and changed its outlook to stable from positive in November, while World Bank gave India a 30 place jump on its Ease of Doing Business ranking. In its Economic Outlook in 2018 report, Standard Chartered said, “The worst is over for GDP growth. We expect growth to normalise gradually over the next four to six quarters as the disruptive impact of major policy changes fades.”
In the current term, budget presentation on February 1 will set the agenda. Finance Minister Arun Jaitely has a tough job on his hands as he seeks to address challenges of job creation and rural distress, along with concerns about fiscal slippages given the additional borrowings and GST collections falling short of the target. Will he slip back into populism, offering giveaways and subsidies in Modi government's last full year budget before national elections in 2019 is a question everyone is asking? It remains to be seen how he prioritises the competing objectives of supporting growth and achieving macroeconomic stability.
