MUMBAI: The near-term growth outlook for India seems brighter than last fiscal and the economy is likely to expand at 7.6 percent in 2016-17, the Reserve Bank said Monday. “Overall GVA (gross value added) growth is projected at 7.6 percent in 2016-17, up from 7.2 percent last year,” RBI said in its Annual Report 2015-16.
A better than anticipated agricultural performance and the possibility of allowances under the 7th Pay Commission’s award being paid out in the fourth quarter of 2016-17 provide upsides to this projection, it said. On the other hand, a rise in the implicit GVA deflator, as Wholesale Price Index (WPI) based inflation hardens, will operate as a statistical downside, RBI said.
The effects of Brexit on the Indian economy have been relatively muted, including the immediate impact on equity and foreign exchange markets, it added. Yet, in view of the linkages to the UK and the euro area, spillovers through trade, finance and expectations channels cannot be ruled out as events unfold, it said.
“Abstracting from these external shocks, the near-term domestic outlook appears somewhat brighter than the outcome for 2015-16,” RBI said. While a durable pick-up in investment activity remains elusive, consumption will continue to provide the main support to aggregate demand and may receive a boost from the revival of rural demand in response to the above-normal and spatially well-distributed southwest monsoon as well as from the seventh pay commission’s award, it said.
