Challenge Will Be To Keep Fiscal Deficit Under 3.5%: Experts

Bengaluru: India's economy is expected to grow by between 6.75 and 7.5 percent in the coming fiscal year, the finance ministry said in its pre-budget Economic Survey on Tuesday, roughly in line with this year's expected 7.1 percent.

The projection comes a day before the government is due to unveil its budget for the 2017/18 year.

Comments

Aneesh Srivastava, Chief Investment Officer, IDBI Federal Life Insurance Co, Mumbai

"It's very nice to understand that the survey is acknowledging the negative impact of demonetisation.

"This is perhaps the first acknowledgement coming from the government. Otherwise so far there has been a denial.

"My expectation is that actual GDP could be very close to the lower end of the range of 6.75-7.5 percent

"I believe that monetary policy is a function of both growth and inflation, despite the fact that many a times the government or RBI has made a statement that they are more inflation-centric. Hence, if growth is coming down, it has opened up scope for a policy rate cut of 25 basis points."

Soumyajit Niyogi, Associate Director - Credit & Market Research, India Ratings And Research, Mumbai

"One surprising element from the report is that the GDP projection range means they are not expecting much pick-up and are expecting stable growth.

"The short synopsis has not talked about any support for monetary policy easing. They are not expecting any significant easing from the RBI.

"Also, now they have shifted the direction from a twin deficit problem to a twin balancing problem with regard to stressed corporate debts and high NPAs in banks.

"So twin deficit problem is not an intrinsic issue anymore, while they have recognised the twin balancing problem as a significant issue to be sorted out."

Achin Goel, Head Of Wealth Management, Bonanza Portfolio, Mumbai

"The challenge will be to keep the fiscal deficit under 3.5 percent.

"We expect inflation should be around 6 percent, it will be heading to that level. The RBI shouldn't cut the interest rates in the next policy meeting. We are already at a low interest rate regime. The kind of spending we have to see, we haven't yet seen. So cutting interest rate would not add anything to that."

Varun Khandelwal, Managing Director, Bullero Capital, Delhi

"Broadly, the economic survey seems to be quite sensible. Assumptions on GDP and inflation are reasonable. On GDP my estimates are about 25 basis points lower. Fiscal deficit will be a moving target due to uncertainty coming in from GST in the next fiscal year.

"Monetary policy will be biased towards moderate easing. I expect cumulative cuts of 25 to 50 basis points this calendar year. Low inflation expectations, recent pass-through of interest rates by banks and a demonetisation driven slowdown - all these factors allow room for rate cuts by the RBI."

Samrat Dasgupta, CEO, Esquire Capital Investment Advisors, Mumbai

"There is a lot of uncertainty regarding GST and demonetization, and they have highlighted the risks to growth because of global trade tensions and GST collection. So its a balanced survey - it's not very optimistic nor very pessimistic.

"There may be a 25 bps cut (in the upcoming monetary policy review), but it will also depend on what the U.S. does."
 

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