31 May 2016 Current Affairs: Indian economy will grow 7.7% in the ongoing fiscal amid likely improvement in the industrial and agricultural sectors' performance on account of good monsoon, says Ficci's Economic Outlook survey. However, it has also said that the investment cycle is expected to take at least 6 months to witness a pick-up.
The growth in 2016-17 is expected to be supported by an improvement in the agricultural and industrial sector performance. Prediction of a good monsoon after two consecutive years of sub-optimal rainfall backs the improved outlook in the current fiscal.
The Reserve Bank last month had forecast a 7.6% growth for the current fiscal on the back of favourable monsoon, a notch lower than the upper end of government's range of 7% to 7.75%.
Agriculture : Moreover, the agriculture sector is expected to record a median growth of 2.8% in 2016-17, with a minimum and maximum range of 1.6% and 3.5%, respectively.
Industrial : Industrial growth is expected to grow by 7.1% in 2016-17, while services sector growth is estimated at 9.6%.
The survey was conducted during April/May 2016 among economists belonging to the industry, banking and financial services sector. The economists were asked to provide forecast for key macro-economic variables for the year 2016-17 as well as for fourth quarter of FY16 and first quarter of FY17.
Economists also shared their prognosis about the expected recovery in the investment cycle. A majority of them were of the view that investment cycle will take at least two more quarters to witness a pick-up.A majority of the economists also felt that while the government and the RBI are working together to address the issues at hand, recovery in the banking system will take time.
The economists observed that the passage of Insolvency and Bankruptcy Code Bill, 2015 is a very positive step to deal with the challenging issue of exiting unviable businesses.Easy exit for a business would help in speedy winding up, productive redeployment of capital and ensure greater availability of credit by freeing up of capital.The median growth forecast for index of industrial production (IIP) has been put at 3.5% for the year 2016-17, with a minimum and maximum range of 3% and 4.5% respectively.
The interest rate scenario was deemed positive by the respondents for a pick-up in credit growth.
In the Union Budget 2016-17, the Finance Minister had announced that the government will reorient its interventions in the agriculture sector to double the income of farmers by 2022. In the current survey, the respondents were asked to indicate the way forward to achieve this target.
The participating economists felt that setting up proper irrigation facilities is definitely a prerequisite. Along with this, encouraging water harvesting, promoting crop insurance schemes with greater vigour and creating a unified agricultural market that would ensure appropriate price for the agricultural produce by eliminating middlemen, will be most critical.It was also proposed that greater investments are needed towards building necessary rural infrastructure (such as warehouses, roads) and rural supply chain infrastructure. This will not only lead to seamless movement of agricultural commodities across the country but will also be the key to generate greater income for farmers.