The economic survey, prepared by chief economic adviser Krishnamurthy Subramanian, which was tabled in the Parliament by finance minister Nirmala Sitharaman today, has predicted 7 percent GDP growth in the financial year 2020.
The economic survey report mentioned stable macroeconomic conditions as the reason behind the higher growth forecast for this fiscal. Huge political mandate augurs well for growth prospects, it noted.
The report said that the crisis in the NBFC sector has been a reason for a growth slowdown in the financial year 2019. The country's GDP growth has averaged a high 7.5 percent in the last five years, the economic survey report added.
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The report mentioned that structural reforms of the last few years were continuing on course. Further, it said that the investment rate was seen higher for FY20 on higher credit growth and improved demand.
Accommodative MPC policy will help cut real lending rates, it noted, adding that decline in NPAs will help push capex cycle.
“I think as of now the banking sector stress is towards the fag end of the cycle. So, that is one positive part of any pickup in investment. However, my sense is that the pickup in investment might take some more time because there is uncertainty still around... second quarter also I think we were just into the first month and my sense is that only in the second half of the current fiscal year that we will see if any visible improvement in the investment activity," Soumya Kanti Ghosh, group chief economic advisor of SBI, said while speaking to CNBC-TV18.
“It has been pointed out that the NPA cycle might have peaked out, but it has kind of moved on from banks to non-banks. We should not forget deleveraging in the corporate sector is also going on, probably at the promoter level. So, I think all these are definitely headwinds for private sector capex," said A Prasanna, chief economist of I-Sec PD.
The survey forecasts that oil prices will decline going forward in FY20 from the current levels.
The general fiscal deficit is expected at 5.8 percent for FY19 against 6.4 percent in FY18, the report said, adding that the government stood by its path of fiscal consolidation in the last fiscal.
“I think the RBI has estimated 5.9 percent, the consolidated deficit for the interim state. So, I think that is in-line with that number. Whether this number will be revised upwards is a matter of debate...," Ghosh added.
The slowdown during the January-March period was due to poll-related uncertainty, noted the economic survey report, adding that falling nominal GDP growth shows secular inflation fall.According to the survey, the share of the informal sector to manufacturing growth fell in the last fiscal. It added that the country must sustain 8 percent growth to become a $5 trillion economy by FY25.