GDP to grow at 7-7.5% in 2018-19, exports set to rebound: Economic Survey

The Dollar Business Bureau

India’s gross domestic product (GDP) is estimated to grow at 7%-7.5% in the 2018-19 fiscal, with exports set to rebound, according to the Economic Survey tabled in parliament by Finance Minister Arun Jaitley on Monday.

“A series of major reforms undertaken over the past year will allow real GDP growth to reach 6.75% this fiscal and will rise to 7 to 7.5% in 2018-19, thereby re-instating India as the world’s fastest growing major economy,” the Survey stated.

The reform measures undertaken in 2017-18 can be strengthened further in 2018-19, it added.

The Survey highlighted that due to the implementation of Goods and Services Tax (GST), resolution of the long-festering Twin Balance Sheet (TBS) problem by sending the major stressed companies for resolution under the new Indian Bankruptcy Code (IBC), implementing a major recapitalisation package to strengthen the public sector banks (PSBs), further liberalization of foreign direct investment (FDI) and the export uplift from the global recovery, the country’s economy started to accelerate in the second half of the year and can achieve 6.75% growth this year. 

As per the quarterly estimates, there was a reversal of the declining trend of GDP growth in the second quarter of this fiscal, led by the industry sector, the Survey pointed out.

“The Gross Value Added (GVA) at constant basic prices is expected to grow at the rate of 6.1% in 2017-18 as compared to 6.6% in the preceding fiscal, it added.

In 2017-18, services, industry and agriculture sectors are likely to grow at the rate of 8.3%, 4.4% and 2.1%, respectively.

After remaining in negative territory for a couple of years, growth of exports rebounded into positive one during 2016-17 and expected to grow faster in 2017-18, the Survey stated.

“However, due to higher expected increase in imports, net exports of goods and services are slated to decline in 2017-18, it added.

The survey pointed out that India can be rated as among the best performing economies in the world as the average growth during last three years is around 4 percentage points higher than global growth and nearly 3 percentage points higher than that of Emerging Market and Developing Economies.

The GDP growth has averaged 7.3% for the period from 2014-15 to 2017-18, which is the highest among the major economies of the world, it added.

Though concerns have been expressed about growing protectionist tendencies in some countries but it remains to be seen as to how the situation unfolds. The factors that could have dampening effect on the GDP growth include the possibility of hike in international crude oil prices.

“However, with world growth likely to witness moderate improvement in 2018, expectation of greater stability in GST, likely recovery in investment levels, and ongoing structural reforms, among others, should be supporting higher growth,” the Survey said.

The Economic Survey, presented a few days before the Union Budget, reviews the developments in the economy in the past one year, highlights the policy initiatives of the government, summarises the performance of major development programmes, and highlights the prospects of the economy.

The Economic Survey is prepared by the Chief Economic Advisor and presented in both the Houses of Parliament, during Budget Session.

Arvind Subramanian, Chief Economic Advisor said in a tweet that the GDP growth is reviving after temporary decoupling. There are robust and broad-based signs of revival in economic activity.

The industry has welcomed the findings of the Economic Survey and is hopeful of revival of exports and private investment. Commenting on the Survey, HKL Magu, Chairman, Apparel Export Promotion Council (AEPC) said, “Economic Survey has predicted 7-7.5% growth in 2018-19 with exports and private investment set to rebound. The survey suggests an improvement in demand and investment, which should augur well for the economy as a whole, and the apparel sector specifically.” 

“The Survey has rightfully pointed out that the Rs.6000 crore package announced in June 2016 has addressed the constraints faced by apparel firms to a large extent and the Rebate of State Levies (RoSL) has increased exports of ready-made garments (man-made fibers) by about 16%,” Magu said.

However, due to the delays in refund of state levies (RoSL) and IGST, the full benefit of the package has yet been realised. If the GST and RoSL refunds issues are smoothened, the industry can aim at achieving double digit growth,” he added.