The Economic Survey ahead of India's budget has called external environment challenging, although projecting a 7-7.5 per cent growth rate in the next fiscal which could accelerate to 8 per cent in a couple of years. The ES also made a case to carry forward the reform process to achieve macroeconomic stability.
After a 7.2 per cent economic growth in 2014-15, the expansion in economy will be 7.6 per cent in the current fiscal, making it the fastest in the world. However, the ES cautioned that if the world economy remained weak, India's growth will face considerable headwinds. On the domestic front, two factors can boost consumption, increased spending from higher wages and allowances of government workers if the 7th Pay Commission is implemented.
The Survey enumerated three downside risks - turmoil in global economy could worsen the outlook of exports, contrary to expectations oil price rise would increase the drag from consumption and the most serious risk is the combination of these two factors. “One of the most critical short term challenges confronting the Indian economy is the twin balance sheet problem - the impaired financial positions of the public sector banks and some corporate houses. The twin balance sheet challenge is the major impediment to private investment and a full fledged economic recovery,” the Survey said.
Indian stocks are relatively resilient despite volatility in the worldwide financial markets and the country can become a leading investment destination going ahead, said the Survey. “The (Indian) market has rebounded time and time again, and it is hoped that as the global financial markets settle down, India can become the leading investment destination owing to its robust macroeconomic fundamentals.”
