The Indian economy is poised to grow at 7 to 7.75% in 2016-17, the government said in a guarded forecast on Friday in signs that it was looking to temper expectations hemmed in by uncertain global conditions.
Inflation is expected to stay in a 4.5-5% range, according to the annual Economic Survey 2015-16 tabled in Parliament.
“Fortifying the Indian economy against possible spillovers is one obvious necessity. Another necessity is a recalibration of expectations,” said the survey anchored by chief economic adviser Arvind Subramanian.
The projections come two days before finance minister Arun Jaitley presents the Union budget for 2016-17 on Monday amid heightened expectations that he will unveil measures to boost investment, spin jobs and multiply income.
Parliamentary logjam over critical reforms such as GST was coming in the way of India’s growth ambitions, the survey said putting the onus on lawmakers to get key legislations moving.
Despite the global moderation, India will remain the world’s fastest growing major economy, a “haven of stability” and an “outpost of opportunity”, the survey said.
According to advance estimates released this month, India’s gross domestic product (GDP) -- the total value of goods and services produced in the country -- will grow at 7.6% in 2015-16, outpacing China’s 6.9% expansion in 2015.
The survey spoke of a “chakravyuha challenge” of making investment rules easier and dismantling exit barriers and made a strong pitch for immediate reform measures, such as goods and services tax (GST), labour reforms, bringing more people under the tax net and raising property tax rates to check speculation in India’s realty market marred by opaque deals.
Job creation for millions of Indians who are likely to join the workforce every year over the next decade remains a key concern, the survey warned.
“India’s economy needs to create enough ‘good jobs’ — jobs that are safe and pay well, and encourage firms and workers to improve skills and productivity,” the survey said.
A ballooning wage and pension bill for civilian and defence staff could also bite away a larger chunk of the government’s resource cake. This could force the finance minister to scour for that extra rupee to make funds available for one-off expenses such as those relating to one-rank-one-pension (OROP) scheme for defence personnel as also the expected 7th Pay Commission payouts.
The 23.5% average hike in central government employees’ salaries recommended by the pay panel could push up the government’s wage bill by an estimated Rs 1.02 lakh crore in 2016-17.
Jaitley would also like to contain fiscal deficit—a measure of how much the government borrows to fund its expenses—within manageable limits.
India has budgeted to control fiscal deficit to 3.9% of GDP in 2015-16, bring it down to 3.5% next year and further reduce it to 3% of GDP the year after.
While a fiscal deficit of 3.9% this year was “achievable”, the coming year is “expected to be challenging one from the fiscal point of view”.
The survey said India is in a good position to reap the advantages of lower global oil prices, low inflation and a normal monsoon next year.