Economy may reach 7% growth in 2018: ASSOCHAM outlook

Things have certainly and surely bottomed out, said the year-ahead outlook

GN Bureau | December 27, 2017


#Economy   #Assocham   #Growth   #GDP  


After ”disruptions" like lingering demonetisation effect and GST roll-out, the Indian economy may reach a 7 percent growth in 2018 with government policies tilting towards the stress-ridden rural landscape in the penultimate year before the Lok Sabha elections, said the ASSOCHAM Year-Ahead Outlook (AYAO).

 Against GDP growth of  6.3 percent in the second quarter of 2017-18, the economic expansion  may reach the crucial 7 percent mark by the end of September 2018 quarter , according to the AYAO forecast, while inflation may range between 4-5.5 per cent towards the second half of the next calendar year with the monsoon being  a key imponderable.

 "Our projections for 7 percent GDP growth are based on the assumption of stability in the government policies, good monsoon, pick-up in industrial activity and credit growth as also stability in the foreign exchange rates. The worries on account of crude oil shooting up are likely to abate, if there are no fresh geo-political shockers," said ASSOCHAM president Sandeep Jajodia.

 While the underlying bullish sentiment should continue to prevail in the Indian stock market in 2018, the returns on equity may not be as robust as in 2017. "This is because the 2017 bull run has already factored in the return of growth steadiness in 2018 and the corporate earnings witnessing a pick -up.”

 Weak base of corporate earnings in sync with the lowering of GDP growth in later part of 2017 would also help the revival in the year ahead. "Things have certainly and surely bottomed out. There does not seem to be any fresh bottom; only an uptick," the AYAO noted.

The AYAO is based on a feedback from brainstorming done by several ASSOCHAM sectoral national councils and its top policy organ, the managing committee.

 A press release said that in the run-up to the state assembly elections in Karnataka, Rajasthan, Chhattisgarh, Madhya Pradesh, after the Gujarat polls, the political economy is set to tilt towards the farm sector which has been witnessing some stress. The stress in the agriculture sector is traceable to lack of reforms in the rural economy. The farm produce is highly vulnerable to vagaries of weather.

Even when the farmer produces a bumper crop; he does not get a remunerative price with supply chain in-efficiencies creeping in. Despite political promises, several of the states have not been able to reform the APMC Act, which restricts farmers to sell their produce to a particular set of cartels. Besides, the import-export policies for the agri products need to be revisited to help growers realise better prices, it added.

 The coming budget is expected to be heavily tilted towards the farmers while the industrial focus would be on sectors which create jobs. "A realisation seems to be dawning that growth per se is not enough, the benefits must be seen in the form of higher employment. The year 2018 would see policies in this direction.”

Overall, the year 2018 would be a year of consolidation and corporate balance sheets should look much healthier than 2017, the AYAO said.  As for pick up in investment, the scenario should turn positive only in the third and fourth quarter of 2018-19, till then the current capacity surplus has to be absorbed and debts reduced.

 

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