Economy to grow by 7.8% in FY16: RBI survey

Mumbai: The economy is expected to grow at a rate of 7.8 percent in the current fiscal, a shade lower than earlier forecast of 7.9 percent, says a survey sponsored by the Reserve Bank.

"Forecasters expect real Gross Value Added at basic price (GVA) to increase by 7.8 percent in 2015-16. 'Agriculture and Allied Activities' and 'Services' are expected to grow by 2.2 percent and 10 percent, respectively," the survey of RBI-sponsored Professional Forecasters on Macroeconomic Indicators said.

The survey released in April had projected the GVA to increase by 7.9 percent in 2015-16.
The professionals in the latest survey viewed that the 'industry' would grow by 6.2 percent in the current fiscal.

The Gross Value Added (GVA) is a new concept introduced by the Central Statistics Office (CSO) to measure the economic activity. As per the CSO, it rose by 7.2 percent in 2014-15 compared 6.6 percent in the previous fiscal.

In 2016-17, the survey said that GVA is expected to increase by 8.2 percent, led by growth in 'services' by 10.1 percent.

"In terms of subjective probabilities assigned to growth projections, forecasters ascribed maximum 55 percent chance that GVA growth in 2015-16 will be in the range of 7.5-7.9 percent," the findings said.

For the year 2016-17, GVA growth in 8-8.4 percent range is the most probable outcome, it added.

It further said the private final consumption expenditure at current prices is expected to increase by 12.7 percent in 2015-16 and further by 13.1 percent next year.

The gross saving rate is projected at 30.8 percent of Gross National Disposable Income (GNDI) in 2015-16 and 31 percent of GNDI in the next fiscal.

As per the survey, the central government's gross fiscal deficit (GFD) is projected at 3.9 percent of GDP in 2015-16 and is expected to moderate to 3.5 percent in the following year.

The combined GFD of Central and State Governments is projected at 6.5 percent of GDP in 2015-16 and is expected to improve to 6.2 percent of GDP in 2016-17.

It further said that both money supply and bank credit growth expectations declined for 2015-16 in the latest round of survey. While money supply (M3) is expected to increase by 12.5 percent in 2015-16, bank credit is expected to expand by 13.5 percent.

Merchandise exports growth is estimated at 1.2 percent in 2015-16 and to improve to 6.2 percent in 2016-17.

"Current Account Deficit is projected at 1 percent and 1.3 percent (of GDP) in 2015-16 and 2016-17, respectively," the survey added.

Forecasters assigned maximum probability of 70 percent that retail inflation will be in the range 5-5.9 percent in March 2016. Based on this probability distribution, the implicit CPI inflation rate for March 2016 is expected at 5.6 percent.