- POSTED: 09 Jul 2014 16:56
- UPDATED: 09 Jul 2014 20:43
India's economy could pull out of its slowdown and accelerate by nearly six percent this fiscal year, a government study forecast Wednesday before the first budget by the new right-wing government.
NEW DELHI: India's economy could pull out of its slowdown and accelerate by nearly six percent this fiscal year, a government study forecast Wednesday before the first budget by the new right-wing government.
The finance ministry's India Economic Survey forecast 5.4-to-5.9 per cent growth in the financial year to March 31, 2015, up from 4.7 per cent in the previous 12 months.
"The economy can look forward to better growth prospects in 2014-15 and beyond," said the survey on the eve of the budget from Premier Narendra Modi's government.
But the report warned the cash-strapped government must walk a tightrope between pro-growth policies and curbing a gaping fiscal deficit, and said patchy monsoon rains, crucial to farm output, posted "downside risks" for growth.
Sidharth Birla, president of the Federation of Indian Chambers of Commerce and Industry, praised Wednesday's survey for identifying "key pain points" and an "appreciably clear" policy direction.
Modi led his Bharatiya Janata Party (BJP) to a landslide election win in May promising economic revival, including by introducing reforms and overhauling ramshackle ports, railways and other infrastructure.
At the same time he pledged to restore the health of India's public finances. Massive subsidies to fund welfare schemes for India's hundreds of millions of poor have swelled the fiscal deficit.
Economists are watching to see whether Finance Minister Arun Jaitley, who has denounced "mindless populism," adheres Thursday in his budget to a target set by the previous government of trimming the deficit to 4.1 per cent of gross domestic product this year from 4.5 per cent last year.
The government underscored its intention to seek more infrastructure private funding in its railway budget on Tuesday, seen as a curtain-raiser to the national budget. It said it would rely on public-private partnerships and open the door to foreign investors to modernise the colonial-era network.
Private economists' consensus growth forecast stands at 5.5 per cent.
Growth has slowed to around half of near double-digit levels a few years ago and India has been stuck in the worst economic slowdown since 1985.
Economists say India needs at least eight percent growth to create jobs for a ballooning youth population.
The number of working-age Indians will climb to 64 per cent of the 1.2 billion population in 2021 from 58 per cent in 2001, the report said.
The survey based its higher growth forecast on expectations that stubbornly high inflation would ease, allowing for growth-stimulating cuts in steep interest rates.
In a hint of the government's budget direction, the report listed some priorities, including simplifying India's web of taxes and making it easier to do business and acquire land for industrial projects.
While India has been moving toward curbing public spending and removing roadblocks to development, "reversion to a growth rate of around seven-to-eight per cent can only occur beyond the ongoing and the next fiscal (year)", the report concluded.
A survey by polling agency C-Voter released Wednesday suggested voter hopes are riding high on Modi, with 61 per cent of respondents saying they believe his campaign pledge that "good days are coming".