India will truly live up to its reputation of being the bright spot in an otherwise hazy horizon of global economy with a "likely" GDP growth of over eight per cent and "very likely" acceleration of 7.8- 8 per cent in the current financial year, an ASSOCHAM Mid Year Review has pointed out.
The Review made quite an optimistic forecast of nine per cent and above growth in the next financial year of 2016-17 if the government and the Congress come together and clear the Goods and Services Constitutional Amendment Bill in Parliament and the roll out of the major tax reforms takes place from April, 2016.
"The renewed optimism comes about despite continuation of a global meltdown in commodity prices with crude oil trading well below USD 40 barrel mark while the entire metal pack is melting away in the heat of crisis. But , it is the domestic demand pick- up, supported by government investment and the services sector , especially transport, hotels and trade that will push the Indian economy to cross the psychologically important level of eight per cent," the Mid Year Review of the chamber said. So, the ASSOCHAM Review pegs the GDP growth for fiscal 2015-16 at 8.1-8.2 per cent.
It said the latest revival in manufacturing which helped overall Index of Industrial Production to reach 9.8 per cent in October, 2015 along with robust pick up electricity and capital goods would lead the growth trajectory triggering, in the process, lot more activities in the services. The number of passengers handled by civil aviation in second quarter of the current fiscal went up by 17 per cent. So was the case with commercial vehicles which registered a growth of 10.7 per cent , another indicator of pick up in the economic activity.
There was a catch up seen by 3.5 per cent in the case of civil aviation cargo and 3.9 per cent by major ports during Q2 of 2015-16.
The overall industrial growth is seen at 7.5-7.8 per cent for the entire FY 16, while the services should expand well over nine per cent with agriculture and allied picking up to 2.8- 3 per cent. The confidence in industrial growth is largely being now driven by manufacturing, electricity and capital goods, while mining would improve as well in the remaining months of the year, it stated.
The winter months, from October onwards, helped by the festival season and pick up tourism in states like Rajasthan, Goa, Kerala, Delhi, Madhya Pradesh augur well for the transportation, hotels and trade. Construction activities seem to be picking up, especially in the roads and highways while some green shoots are visible in micro markets of real estate as well.
According to the review, while rains have remained deficient for two successive years, the negative impact on the Rabi crops would not be as bad as Khariff. "The latest reports suggest the wheat sowing is still in progress in several parts of the country and if we get some showers in the next three to four weeks and do not face any unseasonal rains in March, Rabi crops mainly of wheat, rice ,grams and oilseeds like mustard should help the farm sector. Should these crops improve their prospects the livestock activities also look up giving vibrancy to the agro economy, which is so vital to the country", the Review said.
Sharing the optimism in the document, ASSOCHAM President Mr Sunil Kanoria said while the only drag is the export sector and overall external scenario is playing itself out, helping India. "We would call it 'Luck by Chance' factor.
The ASSOCHAM Review, however, remained worried about the continuous stress on the balance sheets of the public sector banks, underlining the need for a multi-pronged strategy by the Finance Ministry, RBI and the bank managements along with the major borrowers who are well meaning but somehow find themselves in woes of hard economic realities.
The combined stressed assets and NPAs may well be 15 per cent of the total advances, which have to be brought down substantially without any further loss of time. No significant credit growth is possible if this issue is not resolved. "Even if interest rates become further benign, the NPAs and stressed assets would remain a major deterrent for credit growth," the paper mentioned.