Economic Survey downgraded India's GDP growth rate for 2016

• Economic Survey has pegged India's growth at 7-7.5% for the next fiscal year.
• The Survey puts 2015-16 GDP growth at 7.6% below its earlier expectations of 8.1-8.5% expansion.
• While, India is expected to accelerate to 8-10% growth rate in two to five years.

Analysis:

• Exports are not likely to contribute substantially to GDP growth as suggested by growth trend of India's export partners. It is going to bring a turmoil in global economy led by lower exports and tighter financial conditions.
• The Survey also mentioned that income gain due to fall in oil prices is likely to be half of last year which will lead to slower consumption. If a situation arises where oil making companies cut supply, then prices might go up which would eventually lead to less growth and further lead to less room to lower interest rates. Therefore, turmoil in global economy and higher than expected oil prices could arise if oil markets are dominated by supply factors, such as agreements that will restrict output.
• Profitability of corporate sector to remain weak in the next fiscal. The share of debt owned by stressed companies has increased and the Survey also mentioned the substantial decline in capital expenditure.
• The forecast will also depend on the steps taken by the government to check fiscal deficit.
• Keeping these points in mind, there is a need to re-calibrate growth expectations and standards of assessment, given the current global environment and India' growing integration with it. "India's actual growth will, however, depend on global growth and demand
   

By: Vishal