After a 7.2 per cent economic growth in 2014-15, it said the expansion in economy will be 7.6 per cent in the current fiscal, the fastest in the world.
The Indian government will meet its fiscal deficit target of 3.9 per cent of GDP.
Ahead of the Union Budget, the
Economic Survey on Friday termed external environment as challenging but
projected a 7-7.5 per cent GDP growth rate in the next fiscal which could
accelerate to eight per cent in a couple of years.
The Economic
Survey for 2015-16, which was tabled in Parliament today, also made a case for
carrying forward the reform process to achieve macroeconomic stability.
Inspite of
challenges and lower than projected GDP growth rate during 2015-16, “the fiscal
deficit target of 3.9 per cent of GDP seems achievable.”
After a 7.2 per
cent economic growth in 2014-15, it said the expansion in economy will be 7.6
per cent in the current fiscal, the fastest in the world.
However, it
cautioned that if the world economy remained weak, India’s growth will face
considerable headwinds.
On the domestic
side, two factors can boost consumption, increased spending from higher wages
and allowances of government workers if the 7th Pay Commission is implemented
and return of normal monsoon.
At the same time,
the Survey enumerated three downside risks — turmoil in global economy could
worsen the outlook of exports, contrary to expectations oil price rise would
increase the drag from consumption and the most serious risk is the combination
of these two factors.
“One of the most
critical shortterm challenges confronting the Indian economy is the twin
balance sheet problem — the impaired financial positions of the public sector
banks and some corporate houses. The twin balance sheet challenge is the major
impediment to private investment and a fullfledged economic recovery,” the
Survey said.
Stock markets resilient
Indian stocks are relatively
resilient despite volatility in the worldwide financial markets and the country
can become a leading investment destination going ahead, said the Economic
Survey.
“The (Indian)
market has rebounded time and time again, and it is hoped that as the global
financial markets settle down, India can become the leading investment
destination owing to its robust macroeconomic fundamentals,” as per the 2015—16
report card of the state of the economy tabled by Finance Minister Arun Jaitley
in Parliament on Friday.
“Despite
volatility in global financial markets, the Indian equity market has been
relatively resilient during this period compared to the other major emerging
market economies,” it added.
The Survey also
said that the average borrowings by banks have increased significantly in the
immediate aftermath of US fed rate hike, resulting in appreciation of the
rupee.
However, subsequent
to easing of liquidity conditions, the rupee started depreciating.
On trends
witnessed in capital markets, the Survey said that during the fiscal 2015-16
till December the resource mobilisation through the public and right issues has
surged rapidly as compared to the last financial year.
During this
period, 71 companies raised Rs. 51,311 crore from the capital market compared
to Rs. 11,581 crore during the corresponding period of 2014-15. Fund garnered
by mutual funds also increased substantially to Rs. 1,61,696 crore from Rs.
87,942 crore.
During 2015-16 so
far, the Indian equity market has remained subdued. The BSE’s benchmark Sensex
declined by 8.5 per cent (till January 5, 2016) over March 2015, mainly on
account of turmoil in global equity markets.
The net
investment by Foreign Portfolio Investors (FPIs) in the Indian market was at
Rs. 63,663 crore in 2015 as compared to Rs. 2,56,213 crore in 2014.