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India at the top of the global growth ladder

Newsroom247 Desk

fitch ratingsNew Delhi: Fitch has maintained its GDP growth forecast for India for the fiscal year ending March 2016 (FY16) at 7.5%.

Fitch has maintained in its Global Economic Outlook, published 7 March 2016 that growth in India is expected to gradually accelerate to 7.7% in FY17 and 7.9% in FY18. This implies minor downward revisions from the December GEO but leaves India at the top of the global growth ladder.

Real GDP growth in 4Q15 was primarily driven by private consumption, while the data showed slowing fixed investment growth and December industrial production declined 1.3% yoy.

Fitch expects the gradual recovery in FY17 and FY18 to be supported by higher real disposable income, assuming a normal monsoon after two years of below-average rainfall and a substantial wage increase for central government employees.

The gradual implementation of the structural reform agenda is expected to contribute to higher growth, even though progress is lacking so far on big-ticket reforms such as the Land Acquisition Amendment Bill and the Goods and Services Tax. Implementation of legislative reforms has so far been difficult given the government’s limited support in Rajya Sabha ( Senate), but executive reforms continue to be rolled out. The Budget for FY17 contained some further announcements of reforms, including measures related to the FDI regime, the financial sector and agriculture, illustrating that the government continues to gradually broaden its reform agenda.

Cuts in the monetary policy rate by a total 125bp since the beginning of 2015 are likely to feed through to higher GDP growth, even though monetary transmission is impaired by relatively weak banking sector health. Fitch expects another 25bp of monetary policy loosening, facilitated by the government’s recent announcement to maintain its fiscal targets for FY17 and FY18. We expect the Reserve Bank of India to remain keen to avoid a significant deviation from the glide path to its inflation target, as it is still building a track record for its new monetary policy framework.

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Shivani Bhardwaj is Editor Newsroom24x7.com. She has more than a decade of experience as a journalist. She is also an expert on legal matters relating to Petroleum & Energy, Infrastructure, Mergers and Acquisitions, Project Development, Contracts, Corporate Dispute Resolution, Arbitration and Court related proceedings. She has a Masters Degree in Energy Laws from the University of Petroleum and Energy Studies, Dehradun and a Bachelor in Law from the National Law Institute University, Bhopal. Acclaimed journalist Lalit Shastri is the founder of Newsroom24x7. He is is an Indian journalist, columnist, wildlife film maker and environmentalist. He has headed the Madhya Pradesh Bureau of The Hindu and The Asian Age - two of India's leading English newspapers - for nearly 25 years. He had quit a corporate job to investigate the causes leading to the 1984 Bhopal gas disaster. He also covered extensively from ground zero for The Hindu, the riots that followed the demolition of the Babri Mosque in Ayodhya and repeated attacks by Naxalite-Maoists in the Central Indian States of Chhattisgarh and Madhya Pradesh.

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