New Delhi: The Economic Survey 2019 Thursday projected India’s economy to grow marginally higher at 7 per cent in the ongoing fiscal with investment activity picking up during the year.
In his first Economic Survey, Chief Economic Adviser Krishnamurthy V. Subramanian expected a stable macro-economy with a decline in oil prices and lower bad debts in the banking system.
Subramanian also expected rural demand to increase with rural incomes starting to increase again after bottoming out in 2018. A fall in rural demand drove the slowdown in consumption last year.
The projections come at a time when the slowdown in economic growth, led by a fall in both investment and consumption, has become the main worry for the Modi government.
Many economists have predicted that the government may not stick to its fiscal deficit target of 3.4 per cent of gross domestic product in the Union Budget to be presented Friday as it looks to boost growth through increased spending.
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Growth slowdown
The Indian economy slowed for the second consecutive year in 2018-19 to 6.8 per cent from 7.2 per cent in 2017-18 and 8.2 per cent in 2016-17. It came on the back of demand slowdown as reflected by slowing sales of consumer durables, automobiles and housing units.
It even prompted the Reserve Bank of India to announce a cut in policy rates for the third consecutive time by 25 basis points in the June meeting of the monetary policy committee (MPC).
It its policy statement, the committee said “growth impulses have weakened significantly”. It added that low inflation gave the MPC the scope “to accommodate growth concerns by supporting efforts to boost aggregate demand, and in particular, reinvigorate private investment activity”.
The RBI also revised downwards the growth projections for 2019-20 to 7 per cent in the June policy statement, from the 7.2 per cent projected earlier in April. It cited the weakening in domestic investment activity and private consumption, especially in rural areas, to peg the growth for first half of the fiscal at 6.4-6.7 per cent and at 7.2-7.5 per cent for the second half.
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All that remains in the larder is a couple of 25 basis points rate cuts. We seem to be running out of ideas.