The latest round of FICCI's Economic Outlook Survey puts forth an annual median GDP growth forecast for 2018-19 at 7.4 per cent and for 2019-20 at 7.5 per cent. The survey was conducted during October/November 2018 among economists belonging to the industry, banking and financial services sectors.
The median growth forecast for agriculture and allied activities has been put at 3.9 per cent for 2018-19. Industry and services sector are expected to grow by 6.8 per cent and 8.2 per cent respectively during 2018-19.
Further, the quarterly median forecasts indicate a GDP growth of 7.4 per cent in the second quarter of 2018-19. The official growth numbers for the second quarter are expected to be released later today.
The median growth forecast for IIP was put at 4.6 per cent for 2018-19 by the participating economists, with a minimum and maximum range of 4.5 per cent and 5.4 per cent respectively.
The outlook of the participating economists on inflation remained moderate. CPI based inflation has a median forecast of 4.3 per cent for 2018-19, with a minimum and maximum range of 4.0 per cent and 4.8 per cent respectively.
Concerns seem evident on external front with median current account deficit forecast pegged at 2.7 per cent of GDP for 2018-19.
Further, economists were asked to share their views on certain contemporary subjects along with sharing their prognosis on recent measures taken to curtail widening current account deficit and Rupee depreciation. They were also asked to share any additional measures that are required to have a desirable impact on Rupee value/ CAD position.
Participating economists believed that current situation is majorly a result of global spill overs and is not so much due to domestic factors. Global developments such as elevated global crude/commodity prices and significant sell-offs in emerging market have mainly been responsible for this scenario.
The economists felt that measures announced by the government will only work in the short run and more measures need to be taken to address long-term concerns on external front. Participating economists unanimously called for a need to boost exports to safeguard the economy from challenges arising on external front. They believed that consistent encouragement and strengthening of the export sector seemed to be a more sustainable strategy to overcome external challenges.
Furthermore, it was felt that the functioning of Special Economic Zones (SEZ) must be relooked at. Efforts must be taken to enhance the functioning of such zones to provide a boost to exports with focus upon addressing domestic bottlenecks.
Views of economists were also sought on ways in which state finances could be better managed.
The Reserve Bank of India report on 'State Finances: A Study of Budgets of 2017-18 and 2018-19' released in July 2018 highlights the fiscal stress being faced by states-attributing it to a host of factors including farm loan waivers, state governments undertaking the debt of power distribution companies etc. The state fiscal deficit as per cent of GDP missed the 3.0 per cent target for the third consecutive year in 2017-18. Fiscal consolidation at the state level is extremely important for attracting investments and charting out on a sustainable growth path.
Economists unanimously believed that the slippage in fiscal deficit at state level could be attributed to the deterioration in quality of expenditure with a bias towards the revenue portion - implying that the high fiscal deficit has not translated into enhancing capacity.
The economists suggested that improving the quality of expenditure was the need of the hour. States must strive to reduce their non-productive spends (such as interest payments, loan waivers) and divert more resources towards productive spending.
The participants emphasised the need for promoting revenue generating activities such as improving exports and overall production levels. This could be achieved by making efforts to identify potential products for exports from each state by the central government and improving overall infrastructure requirement.
Economists felt that the economy is still in the transition phase after the introduction of goods and services tax (GST) and that management of state finances will improve manifold once GST stabilises.
Finally, with general elections round the corner, economists were asked to list reform measures that need to be prioritised on economic front.
Participating economists were of the view that while the current government has initiated many important structural reforms viz. GST, Insolvency & Bankruptcy Code, Power Sector Reforms, Real Estate (Regulation and Development) Act and Jam Trinity for financial inclusion, we need to continue with our focus on execution.
Apart from these, there is a need to urgently focus on several other areas. Reforms in the factor markets (such as land and labour) still need to be addressed. This gains more importance amidst the fact that India is eyeing to be a global manufacturing hub through the 'Make in India' scheme. The agriculture sector, too, is in the need for urgent and fast paced reforms, especially at the state level.
Exports is another area that requires attention. It was suggested that each state be given mandatory targets of export growth in the products and services that the respective state has a comparative advantage vis-a-vis other major competing states/nations. The states should also be fully supported to help create the right ecosystem for promoting the identified industries. This will go a long way in creating a competitive environment within the country.
Initiatives must also be taken to preserve and enrich the natural resources of the country. This becomes even more important amidst the occurrences of frequent drought and flood conditions in the country and climate change becoming a real problem. A proper water management policy is the need of the hour to reduce the impact of such calamities. Preservation efforts for resources like minerals, water, petroleum must also be made through policies for better and secured growth of the country. Energy reforms are the immediate need in the country. Economists believed that the government must continue with reforms on the social side including health, education. This will ensure empowerment of people at all levels and create a healthy, empowered and knowledge driven workforce.
