The fiscal year 2014-15 has been quite optimistic so far. While we are still away from achieving the targeted 8% growth milestone, the economy certainly seems to be treading on the right course once again.
Various macro data released in the current fiscal reflect early signs of economic revival. The index of industrial production (IIP) reported a growth of 4.7% in May 2014, which was the highest in about 19 months. Though the increase in IIP comes over a negative base but the sectoral numbers point towards growth becoming broad-based. This upturn is further confirmed by a pick up in non-oil imports in June 2014. Exports have recorded double-digit growth in May and June 2014. The advanced countries are gradually recuperating and this clearly bodes well for India’s external sector. In addition, inflation rate—both producer and retail prices—also reported softening on the back of lower food and fuel prices. Truant monsoon, which had been much of a concern this year, seems to be gaining some momentum. We can expect prices to remain range-bound this year. These initial green shoots of a turnaround are encouraging but will have to be nurtured, going ahead.
The government’s first Railway and Union Budgets have articulated the direction and roadmap for accelerating productive investments and generating employment. The government has displayed its commitment towards improving policy environment for business and addressing the existing bottlenecks. The thrust on infrastructure, domestic manufacturing and agriculture should enable sustainable high growth over the next few years. There is a renewed optimism in investor sentiment, which is corroborated by some of the surveys conducted by Ficci. As per Ficci’s recent CEOs Poll, around 50% of the participants indicated an increase in investments encouraged by the policy direction and growth-oriented measures announced in the Budget.
Ficci’s latest Economic Outlook Survey puts across a GDP growth estimate of 5.3% for 2014-15. This is towards the lower end of the assessment of 5.4-5.9% GDP growth made in the Economic Survey. We can certainly make growth touch the better end of this range, provided the government sticks to its policy agenda in a ‘time-bound’ manner.
In addition, some areas need immediate action. One, quick resolution of food inflation requires focused attention. Unless food inflation is brought under control, all development plans will fail to materialise. Measures taken by the government to address this issue need to be supplemented by a resolute and coordinated action backed with hard data.