Indian economy may continue to see recovery and GDP growth is likely to be higher at 7.8 percent in the current fiscal, even though it will be “uneven”, bolstered largely by “strong consumption” and public expenditure, a report by DBS has said.
As per global financial services firm, doubts however remain r on the underlying discrepancies in the GDP numbers. For the 2015-16 fiscal, the GDP growth has been fixed at 7.6 per cent.
“We expect growth to gain momentum in 2016-17 fiscal, with headline real GDP up at 7.8 per cent,” DBS said in a research note.
Although January-March growth was better than expected on real GDP and gross value added (GVA) basis, it “masked” underlying weakness in fixed investments and non-agricultural growth, the report said further.
Firm added that burden of lifting growth is likely to be “uneven” largely due to strong consumption followed by public capex, while private sector investments may improve in October-December quarter onwards.
“The upcoming pay commission changes will be additional positive. Rural counterparts are also expected to lend a hand in 2016-17 fiscal following a normal monsoon,” it added.
However, private sector remains subdued on the back of limited benefit from easy monetary policy, weak global demand pressure from stressed balance sheets.
“Early indications of a turnaround in corporate earnings in the first quarter of this year bode well, but it remains to be seen if higher input prices depress margins,” the report said.
Economy of the country expanded by 7.6 per cent in 2015-16. Government expects the economy to rise by 7-7.75 per cent in ongoing fiscal.
On Reserve Bank’s policy stance, the report said that limited disinflation may narrow the room for further rate cuts.
“Transmission of 150 bps rate cut since January 2015 and provision of liquidity to meet will continue to be a priority for the RBI, until the room to ease further re-emerges,” DBS said.