Indian economy set to perform strongly, but challenges remain

 The Dollar Business Bureau While India’s economic outlook remains fairly stable, recent revisions to the national accounts methodology and the revised historical data are lifting the forecast, says FocusEconomics, a Barcelona (Spain) - based research firm in its ‘Consensus Forecast’ on India. The firm’s panellists raised their projections by 0.6 percentage points in March 2015. The panel now expects GDP to increase 7.1% in FY 2015-2016. For FY 2016-2017, the panel sees the economy expanding 7.6%. The report added, India’s external sector showed that the trade deficit totalled USD 6.8 billion in February, which was below the USD 8.3 billion shortfall observed in the same month last year. February’s result represents the lowest deficit in 17 months. In the 12 months up to February, the trade deficit recorded USD 135.6 billion, which narrowed slightly from the USD 137.1 billion shortfall recorded in the 12 months up to January. The narrowing in the trade deficit showed that imports contracted 15.7% annually in February, which followed the 11.4% fall registered in January. The reading, which marked a 12-month low, was largely the result of the sharp decline in oil prices. Accordingly, oil imports totalled USD 6.10 billion, which represented a 55.5% decrease compared to the same month of the previous year. Meanwhile, exports contracted 15% year-on-year in February (January: -11.2% year-on-year). FocusEconomics Consensus Forecast panellists expect exports to increase 4.9% in FY 2015-2016, reaching USD 341 billion. In FY 2016-2017, the panel sees exports expanding 8.7% and reaching USD 371 billion. However, in a recent ‘Interim report’ in March 2015, the Organisation for Economic Co-operation and Development (OECD) Economic Outlook publication said, “ Indian economy is set to perform strongly, if key challenges can be overcome. With obstacles emerging to the adoption of growth-friendly structural reforms, maintaining rapid growth will pose a difficult challenge, notwithstanding the strong current momentum."    

This article was published on April 1, 2015.