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ICRA foresees 7.7% growth for India in 2016-17

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March 23
9:17 PM 2016

Indian economy growth rate has been forecast at 7.7 percent for next financial year 2016-17. The implementation of 7th Pay Commission, OROP recommendations and domestic consumption will propel growth rate of India's gross domestic product (GDP). 

Rating agency ICRA in its macroeconomic update noted that fresh project pipeline seems very robust, but commencement of work will lag behind the announcements. Some industrial sectors still have moderate capacity utilization.  ICRA further said that planned rise of INR 1.2 lakh crore (1crore=10 millions) in 2016-17 budget would be funded through extra-budgetary sources. 

Business Standard reports that recommendations made by 7th Pay Commission and One Rank One Pension (OROP) schemed for defense services are expected to boost economic growth. Adding to this, revival in rural demand will also further strengthen the GDP. The progress on plan expenditure will boost infrastructure development and economy growth rate. 

ICRA in its latest study projected 7.7 percent economy growth rate for 2016-17 financial year.  For current fiscal of 2015-16, Indian GDP growth rate is pegged at 7.6 percent. Indian government's forecast for 2016-17 financial year is in the range of seven percent and 7.75 percent. 

Power transmission capacity recorded 47.3 percent expansion in April 2015-January 2016 period. Nine states have signed memorandum of understanding (MoU) with central government for UDAY scheme, which aims at financial turnaround of state-owned electricity distribution companies (Discoms). UDAY scheme covers about 43 percent of Discom debt outstanding of INR 4.3 trillion, as reported by IIFL (India Infoline News Service).

ICRA said: "Value of revived projects improved to a four quarter high of Rs 40,000 crore in the third quarter of FY16, while remaining low, facilitation of clearances, lower input costs for firms are not sufficient to revive investment plans in the absence of a pickup in demand."

Over two-thirds of INR 32.2-lakh crore projects, which have been submitted to Cabinet Committee on Investment (CCI) are in power, steel and petroleum & natural gas segments. Central government is planning to generate more revenues from five rounds of hikes in excise duty on fuels, which are effective from November 2015. Indian government is hoping to get more tax revenues by INR 17,000 crore in last five months of the current fiscal 2015-16.

The Financial Express sees a potential upturn in rural demand presuming a normal monsoon. The Economic Survey projected real GDP growth for 2016-17 financial year at 7-7.75 percent. According to advance estimates by Central Statistics Organization (CSO), GDP growth rate would be 7.6 percent for the 2015-16 financial year. 

Project completion fell by 12.8 percent on year-on-year basis to INR 80,000 crore in third quarter of current fiscal. These projects were mostly in power, transport services, construction and real estate.

The value of new projects announced during October-December quarter is at INR 1.2 lakh crore. The new projects were mostly in electricity, machinery, transport equipment, transport services and miscellaneous services.

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