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September 07, 2015

"This is the best year for the govt to set the house in order"

In a Forbes article, IDFC Chief Economist Indranil Pan pegs GDP rise at 7.7 percent for the current fiscal. Excerpts below:



"... Pan says he is 'cautiously optimistic' about India’s growth story. 'This is the best year for the government to get the house in order. It is taking small steps, at the moment, to create a platform for sustainable growth,'... One of the biggest differences between the economic recovery now and the 2003-08 period is that this is an investment-led, rather than a consumption-led, story, he says... 

'The investment cycle is showing some early signs of recovery. Led by an 18 percent rise in tax revenues, the government’s capital expenditure spending has increased by 18 percent in the April-June quarter of the current fiscal, mostly in the areas of roads and civil aviation,' Pan wrote in an August 19 IDFC macro-economic report titled ‘India: Some hits, some misses’

In another positive development, capital goods production has expanded 6.2 percent in FY15 after three years of decline and import of capital goods has risen since November 2014 after declining for two-and-a-half years, the IDFC report says.


...'With expectations of headline retail inflation at around 5 percent average for FY2016, we think there will be scope for the RBI to reduce the repo rate by a further 50 basis points,' he says. This, along with recapitalisation of banks, should help lower the borrowing and lending rates of banks further, he added...

... India, he feels, is better-placed than it was during the US-linked ‘taper tantrum’ days of 2013. 'The RBI has enough ammunition to deal with the situation [of a weakening rupee],' he says.

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