New Delhi: The Economic Survey said that keeping the Indian economy stable is “remarkable... not least because they have been accomplished in the face of global headwinds and a second successive season of poor rainfall.”
The Survey added: “The task now is to sustain them in an even more difficult global environment. This will require careful economic management.”
The Survey signalled that the government may review its fiscal deficit target for the next fiscal year due to the recommendations in the 7th Pay Commission report. It called for more easing of interest rates in view of current low inflation to help industry, implementation of the Goods and Services Tax and bringing down subsidies.
It warned that India will needs to prepare itself for the possibility of turmoil on international currency markets amid an “unusually weak external environment”. It said: “India must plan for a major currency readjustment in Asia in the wake of a similar adjustment in China.”
“For now, but not indefinitely, the sweet spot created by a strong political mandate but recalibrated to take account of a weaker external environment, is still beckoningly there,” said the Survey.
“In the current global environment, there needs to be a recalibration of growth expectations and consequently of the standards of assessment.” It warned if global growth remained weak, despite reforms, Indian will grow near 7-7.5 per cent rather than 8-10 per cent.
“If the world economy lurches into a crisis or slides into further weakness, India’s growth will be seriously affected, for the correlation between global and Indian growth has been growing dramatically,” the Survey said.
“India’s medium-term growth trajectory could well remain closer to 7-7.5 per cent per cent, notwithstanding the government’s reform initiatives, rather than rise to 8-10 per cent that its long-run potential suggests,” it added.
