Deficit monsoon dents growth, govt lowers GDP forecast figures

Mid-year economic review calls for special emphasis on agriculture

GN Bureau | December 18, 2015



Deficit rains and resultant fall in agricultural output has forced the government lower the GDP growth forecast for the current financial year to 7-7.5%.

The latest GDP forecast, given in the Mid-Year economic review of the economy tabled in parliament on Friday, is broadly in line with 7.4% growth projected by the Reserve Bank of India.  The growth rate was previously predicted at 8.1-8.5% and revised after the economy grew at 7.2% in the first half of the 2015/16 fiscal year.

The report, authored by chief economic adviser Arvind Subramanian, said retail inflation was likely to be within the target of about 6%.

It also said the government faces a challenge in meeting its budgeted fiscal deficit target of 3.9% because of the decline in nominal GDP.

“Slower than anticipated nominal GDP growth will itself raise the deficit target by 0.2% of GDP,” the report said, adding that “the anticipated shortfall in disinvestment receipts, owing to adverse market conditions for a portfolio that largely comprises commodity stocks, will add to the challenge.”

The government has a fiscal deficit target of 3.9% of GDP in the current fiscal and 3.5% in FY17. There will be also pressure on the finances because of the Seventh Pay Commission recommendations and One-Rank-One-Pension for defence personnel.

The mid-year review does not suggest relaxing fiscal targets but raises red flag over demand and the role monetary and fiscal policy in dealing with the situation.

Decline in nominal GDP growth will impact revenue collection going ahead, chief economic advisor Arvind Subramanian said making while calling for an assessment of the fiscal and monetary policy.

The review calls for special emphasis on agriculture given the stress in the sector because of two successive poor monsoons. It does not expect a consumption boost similar to the current year in the year ahead because of declining crude prices.

Comments

 

Other News

Modi flashes V sign

Prime minister Narendra Modi flashed the victory sign before entering parliament, as trends indicated that the Bharatiya Janata Party was all set to retain Gujarat and win in Himachal Pradesh. Modi showed the V sign to reporters on Monday, soon after leads showed that the BJP had crossed the

A newbie makes its presence felt

For a party that was formed barely a couple of years back, the Bharatiya Tribal Party seems to have done well for itself as it is headed for victory in at least two seats in Gujarat. The party came into existence in 2015, said election commission of India HYPERLINK http://eci.nic.in/eci_main

A nominal Left presence in Himachal

Himachal Pradesh was all about the bitter battle between the Congress and the BJP. Yet, in one assembly constituency, the Communist Party of India (Marxist) edged out both of them. The election commission of India website showed that a CPI (M) candidate was leading in at least one seat in th

Rahul Gandhi’s rise comes at the right moment

In future, the Gujarat elections might as well be remembered for the arrival of Rahul Gandhi.   Going by the leads, the Congress is certainly not going to win, and few had predicted anything like that. However, the party looks set to improve its performance. The Congress has for

When some opted for NOTA

Over one and a half lakh voters in Gujarat and nearly 10,000 voters in Himachal Pradesh pressed the NOTA button, expressing their wish that none of the candidates were suitable to be elected to the assembly. In Gujarat, 158934 voters opted for NOTA (None of the Above). They form 1.9 percent

Trends: BJP coasts past halfway mark in Gujarat

There was a time during the vote count when the BJP election managers may well have chewed through their nails as the Congress put up a spirited fight in Gujarat and Himachal Pradesh. But, soon the tide turned in their favour, with the initial trends showing the electorate pushing the BJP past the halfway



Video

Current Issue

Opinion

Facebook    Twitter    Google Plus    Linkedin    Subscribe Newsletter

Twitter