Economy in 2018-19 : Financial Projections

 

  • Drivers of Growth: 
    • Growth in India is being primary driven by private consumption and government spending.
    • But other two engines of growth – investment and exports – have slowed down.
  • Capital expenditure: 
    • Capex by government alone will be insufficient to revive the capex cycle of the economy.
    • Its share in total capex of economy was only 11.1% during 2012-17.
    • On the other hand, share of private corporations was 40.9%.
    • Private corporations in combination with household sector command 77.5% of total investment in the economy, so their capex revival is important for broad-based recovery in the investment cycle of the economy.
  • Consumption expenditure: 
    • Private final consumption expenditure is projected to grow at 7.6% in 2018-19 compared to 6.6% in 2017-18, while expansion of government final consumption expenditure is expected to slow down to 8.6% from 10.9% during the same period.
  • Exports: 
    • The annual value of exports will touch $345 billion in FY19, crossing peak of $318 billion attained in FY14, but India will continue to face headwinds on the exports front.
  • Rupee: 
    • It has already depreciated 7.7% till July 2018 in response to elevated global turbulence, worsening of current account deficit (CAD), rising inflation and concerns related to fiscal deficit.
  • CAD: 
    • India’s currency account deficit to rise to 2.6% of GDP in 2018-19, up from 1.9 % in the last fiscal year.
    • In absolute terms, it is expected to widen to $ 71.1 billion in 2018-19 from $48.7 billion in 2017-18.
    • Mobilisation of $25 billion from non-resident Indians (NRIs), similar to funds raised in 2013, will be able to finance CAD.