India: India’s economic growth set to bounce back as slump bottoms out: Govt adviser

  • Indian economic growth is poised to bounce back after slipping to a more than six-year low of 4.5% in 3Q19 as the government has taken measures to prop up investments and consumer demand, a top government adviser said. “Corporate tax reductions, the Insolvency and Bankruptcy Code and the banking sector reforms have helped and will help propel growth further,” said Sanjeev Sanyal, principal economic adviser at the finance ministry
  • The Insolvency and Bankruptcy Code, introduced in May 16, has helped banks to recover billions of dollars stuck in outstanding corporate loans and offer loans to new borrowers.
  • Sanyal said economic growth was set to accelerate to 6% in the financial year beginning in Apr 20, compared with estimated growth of 5.0% in the current one.
  • But many private economists are less optimistic, saying the current downturn may continue for the next few quarters due to a dip in private investments and tepid consumer demand.
  • Nomura said Asia’s third-largest economy will see a sub-par recovery, and forecast 4.7% GDP growth for FY20 and 5.7% for FY21.
  • Sanyal dismissed the conservative estimates and said his numbers took into account early signs of recovery in manufacturing and a pick-up in consumer demand.
  • He said the government expected that average consumer price inflation would fall to 4% in the next financial year beginning Apr 20, after a recent spike driven largely by food prices.
  • There is enough space for the central bank to further cut interest rates, however, as inflation was likely to ease following a fall in vegetable prices, he said.
  • Finance Minister Nirmala Sitharaman, who tabled her annual budget earlier in Feb 20, told parliament on 11 Feb 20 that the signs of “green shoots were visible” and the economy was no longer in trouble.
  • Sanyal said the budget has offered a clutch of tax incentives for sovereign wealth and insurance funds, which would leave more banking funds for private companies despite higher state borrowings.
  • Other than the coronavirus outbreak in China, there is no “major other disruption,” to India, he said adding it was difficult to quantify the impact as the situation was still evolving.

External Link :