Indian economy growth has been strong in the first half of the financial year with a modest rate of inflation. However, there are both hits and misses in the first part. Recently, the increased gap in the current account deficit has reserved the judgments of economists on meeting the fiscal deficit target. In the current scenario, both credit and currency seem to be volatile in nature. To determine the growth rate, there has to be a deep analysis of inflation, current account deficit, fiscal deficit along with currency and credit market.
The inflation came down 4 percent for the first time in this year in the month of August and lingered below that until September. As per the prediction of Reserve Bank of India, the inflation will perhaps now rise in the upcoming months and will range somewhere in between 4.7-4.8 percent. To curb this expected situation, the Monetary Policy Committee transformed its position to calibrated tightening which means that theatre is a possible hike rate again. But some experts still believe that inflation will drop further like SBI’s Chief Economic Advisor Soumya Kanti Ghosh. He stated that inflation will drop to at least 3 percent or even less than that that implies another rate hike off the table for the remaining fiscal year.
There is a common concern among the Economists over the widening of the current account deficit in another half of fiscal year. Indian economy growth rate will get affected due to the hitting of the current account deficit upper end of the expected band. There seems to be little to no control over the global oil prices which is eventually reducing the demands. Another hitting factor is weaker rupee as Indian currency has dropped about 14 percent in this year. Even the effective exchange rate has been depreciated by a lower 5 percent
The RBI estimation unveiled that the fiscal GDP is likely to grow at 7.3-7.4 percent which will make the full financial year growth to be around 7.4 percent. A similar prediction has been shared by eminent organization IMF.
Indian economy growth rate showed a possible moderation ahead in the upcoming months. It has been noticed that there is a sequential acceleration in the growth rate from September 2017 quarter. But some of the economists differ on the views and believe that the rate will come down in the remaining quarters. It can be true if the oil prices continue to soar higher with weak food price inflation. These two factors can definitely interrupt the consumption demand of rural and urban. Another factor that can bring down the growth rate is the weakness in the rupee, which is tumbling down badly in the last few months. Also, a global deceleration can make a direct impact on the growth rate figures. (Via Bloomberg Quint)
Maintaining High Growth
In order to maintain a consistent and high growth rate, there is a need for strong and decisive leadership at the Centre. Arun Jaitley, the Finance Minister of India, stated that to achieve a high growth trajectory there is a need for higher resources, higher revenues and better infrastructure objective. In addition to this, he also said that the country needs leadership with absolute clarity and not lack of understanding of policies or directions. In order to enjoy the sweet spot (as referred by IMF) for the next two decades, a strong economy has to be resilient, Economic Times reported.
The successful achievement of Indian economic growth depends on its resilient nature. The economy needs to become flexible so that it can bear challenges and adverse situations that might pop up abruptly against time.[The views and opinions expressed in this article are those of the authors and do not necessarily reflect the views and/or the official policy of the website. ]