India’s export growth likely to touch 7% in FY2016: Report

The Dollar Business Bureau As global growth momentum improves and moderating inflation boosts competitiveness, India’s export growth is expected to be at 3.2% for FY2015 and might inch up to 7% in FY2016, said Asian Development Outlook (ADO) 2015, an annual publication of the ADB (Asian Development Bank). In FY 2016, the current account deficit will expand to 1.5% as recovering oil prices raise oil imports. Rising industry and investment will raise demand for imports other than commodities, bringing overall import growth to 5%. Further growth recovery in the advanced economies would boost exports, and petroleum exports would benefit from higher oil prices, the report added. Stating that the government investment in infrastructure for energy, transport and industry is projected to rise by 25% and likely to renew the investment cycle, the report said that, for India, growth picked up in 2014 due to a marked decline in inflation, comfortable external position that was helped by positive policies and lower global oil prices. With the focus now being on economic strengthening through higher infrastructure spending, increased fiscal devolution to states, and continued reform through financial and monetary policy, GDP growth is expected to accelerate to 7.8% in FY2015 on improved performance in both industry and services as policy addresses structural bottlenecks and external demand improves, said the report. Growth is expected to edge up further to 8.2% in FY 2016, helped by a supportive monetary policy in 2015, as inflation continues to trend lower and by a pickup in capital expenditure. A further pickup in economic growth would be contingent on accelerated investment. Prospects look promising at this stage, though significant challenges remain. Policy momentum toward addressing structural bottlenecks that hampered the investment climate is likely to provide a fillip to the investment cycle. Investment sentiment should improve with government measures to remove bottlenecks to investment, expediting environment and forest clearances, easing land acquisition for building infrastructure and industrial corridors, allowing the auction of coal mines to the private sector, and easing the burden of compliance with Labour Laws for small and medium-sized enterprises. While these measures show the government’s commitment to pushing through reforms, some have been introduced through executive orders and will become void without legislative ratification within the stipulated time frame. This leaves uncertainty for investors, the report added.  

This article was published on March 24, 2015.