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India’s 2014-15 GDP growth seen at 5.4-5.9%: Economic Survey

July 9: The Indian economy is likely to grow in the range of 5.4%-5.9% in 2014-15, overcoming the sub-5% growth in the gross domestic product (GDP) witnessed over the last two years, the Economic Survey for 2013-14, tabled by Finance Minister Arun Jaitley, said.

An expected, a poor monsoon, disturbed external environment and elevated food inflation, however, remain causes for concern and can have a bearing on the growth recovery, the survey informed.

After recovering in 2009-10 and 2010-11 from the crisis and slowdown of 2008-09, the GDP growth slumped to below 5% for the two consecutive years of 2012-13 and 2013-14.

The Survey, released a day ahead of the Budget for 2014-15, expects moderation in inflation to ease the monetary policy stance and revive the confidence of investors.

“With the global economy expected to recover moderately, particularly on account of performances in some advanced economies, the economy can look forward to better growth prospects in 2014-15 and beyond,” it said.

The Survey said the growth slowdown in the last two years was broad-based, affecting in particular the industry sector. Inflation, though, declined during this period, but still continues to remain above the comfort zone, owing primarily to the elevated level of food inflation.

The survey noted that the external sector witnessed a notable turnaround after the first quarter of 2013-14 and the year ended with a current account deficit (CAD) of 1.7% of the GDP as against 4.7% in 2012-13. Improvement is also observed on the fiscal front, with the fiscal deficit declining from 5.7% of the GDP in 2011-12 to 4.9% in 2012-13 and 4.5% in 2013-14.

“In industry, the contraction in mining and quarrying for the second year in a row in 2013-14 and the negligible growth in manufacturing over the past two years indicate the severity of structural bottlenecks. A slowdown is also noticed in services, in particular internal trade, transport and storage sectors that are largely attributed to the loss of momentum in commodity-producing sectors, especially, the industry sector. Thus, the revival of the industrial sector, with its economy-wide linkages, is central to the revival of aggregate economic activity,” it said

The Economic Survey pointed out that the priority of the government will be revival of business sentiment that could be at the heart of restarting the investment cycle.

Aggregate demand (measured in terms of the GDP at market prices) registered a growth of 5% in 2013-14 compared to 4.7% in 2012-13, primarily due to improvement in net exports. The decline in the rate of gross fixed capital formation in 2013-14 reflects subdued business sentiment.

Targeted measures by the government and RBI have improved the external economic situation significantly, even as India remains exposed to investor risks and policy shifts in advanced economies.

“Regaining the growth momentum requires restoration of the domestic macro-economic balance and enhancing efficiency. To this end, the emphasis of policies would have to remain on fiscal consolidation and removal of structural constraints. Though some measures have been initiated to this end, reversion to a growth rate of 7-8% can only occur beyond the ongoing and next fiscal,” the Survey said.