India is the world’s fastest growing large economy and “continues to remain a bright spot in world economy” with robust macro-economic and fiscal parameters. The GDP growth numbers of 7.9% in Q4 of 2015-16 and 7.6% in the whole of 2015-16, according to the latest data released by the Government of India. The Central Statistical Office’s (CSO) figures come on the back of strong showing by agriculture and mining sectors. The figures are also a reflection of improvement in electricity generation and water and gas production in the fourth quarter of the fiscal. GDP numbers were earlier pegged at 7.2 per cent in 2014-15. As a result, now India has overtaken China, which reported a 6.7 per cent growth rate in the March quarter—its slowest in several years.
The data shows that fiscal deficit in 2015-16 stands at 3.9% of GDP. This is an improvement over the fiscal deficit of 4.1% in 2014-15 and 4.7% in 2013-14. Revenue deficit has decreased due to increased capital expenditure of the Central Government. Revenue Deficit, which amounted to 3.2% of GDP in 2013-14, has upgraded to 2.9% in 2014-15 and 2.5% in 2015-16. Capital expenditure has improved to Rs 2,35,253 crore in 2015-16, which is an increase of Rs. 38,572 crore over 2014-15 and Rs. 47,578 crore over 2013-14.
Latest figures in line with IMF predictions
The latest figures are in line with the predictions of the International Monetary Fund (IMF). An IMF report predicted similar figures and said, “India continues to remain a bright spot in the otherwise bleak global economic forecast.” According to the World Economic Outlook released by the IMF, India will be the fastest growing major economy in 2016-17 at 7.5%, ahead of China, at a time when global growth is facing increasing downside risks. The April 2016 World Economic outlook titled ‘Too slow for too long’ retained India’s growth prediction while lowering global growth projections, pointing out that volatility in financial markets and non-economic risks were increasing risks of a derailed recovery. The report further said that the world economy will grow at 3.2% in 2016 and 3.5% in 2017, lowering its earlier projection by 0.2 and 0.1 percentage points, respectively. It also marginally increased its growth projections by 0.2% percentage points for China to 6.5% and 6.2%, in 2016 and 2017, respectively, citing resilient domestic demand.
“Global growth continues, but at an increasingly disappointing pace that leaves the world economy more exposed to negative risks. Growth has been too slow for too long,” said Maurice Obstfeld, economic counsellor at the IMF.
According to the CSO data, the farm sector grew by 2.3 per cent from a year ago compared with a 1.0 per cent contraction in the December quarter. Mining grew 8.6 per cent in the March quarter, up from 7.1 per cent in the previous quarter. Electricity, water and gas production growth surged to 9.3 per cent from 5.6 per cent in the December quarter. While the Economic Survey had projected a wide band of 7-7.75 per cent growth in 2016-17, boosted by normal monsoon projection, it had, however, cautioned that with the global slowdown likely to persist, chances of India’s growth rate in 2016-17 increasing significantly beyond 2015-16 levels were not very high.
“The figures are encouraging but we will have to see whether they sustain in the long run as the global economy is still in a slump. In the medium term, continued weakness in the world economy, problems in our banking sector, and the fall in investment rates may jeopardize this onward march,” said Shashank Dixit, CEO, Deskera, a business software provider.