India is expected to grow by 7-7.5 per cent in 2015-16, slower than the previous estimate of 8.1-8.5 per cent as weak exports, sluggish farm sector and private investment weighed on faster expansion, as shown by the government's mid-year review.
While RBI estimated growth to be about 7.4% this year, private economists and multilateral agencies said the Indian economy will expand close to 7.5%. The Indian economy is seen as a bright spot against the backdrop of slowing growth across the world. Even with this growth rate, India will still be the fastest growing economy in the world. The government vowed to meet the fiscal deficit target of 3.9 per cent for the current financial year without resorting to any expenditure cuts but said the fiscal outlook for next year was challenging and called for a careful reassessment of both fiscal and monetary policies. Retail inflation is likely to be within RBI's target of about 6 per cent in 2015-16.
“The economy is recovering but it's hard to be very definitive about the strength and breadth of the recovery for two reasons; economy is sending mixed signal and second there is some uncertainty over how to interpret GDP data,” said Arvind Subramanian, chief economic adviser in the finance ministry. “A lot is going on in the economy and different things are happening in different sectors, which make interpreting somewhat difficult,” he said, adding that overall tax revenues were buoyant, inflation was under control and external situation was robust.
“The sharp and continuing decline in nominal GDP growth, as well as the fact that the economy is powered only by private consumption and public investment -is a cause for concern. For sustainable and rapid medium term growth, private sector investment and exports need to revive,” the review said. The finance ministry estimates nominal GDP growth in 2015-16 at 8.2 per cent. Nominal GDP refers to growth without adjusting for inflation. “Declining nominal GDP growth and challenges to the outlook for real GDP growth raise questions about the appropriate role for fiscal and monetary policy.”
