Indian economy to grow 7.7% in 2016-17: ICRA

Pick-up in consumption after the implementation of the Seventh Pay Commission recommendations and OROP scheme along with a potential upturn in rural demand are likely to boost economic growth in FY17, according to a report by credit rating agency ICRA.

Published: March 22, 2016 2:09 am

It says India is expected to see an improvement in the economic growth rate to 7.7% in FY17.

While the fresh project pipeline appears robust, commencement of project work will see a lag after the announcements, given moderate capacity utilisation in some sectors.

Past experience suggests that several projects may be slow to get off the ground whereas others may remain at the announcement stage.

Recent spells of unseasonably heavy rainfall may dampen yields. Rural sentiment expected to remain muted in the immediate term, although waning of unfavourable base effects to arrest contraction in sales of rural-focussed items such as tractors and motorcycles.

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Though despite late sowing, lower coverage and unfavourable rainfall, second advance estimates indicate a surprising uptick in rabi production of wheat (+8.4%), oilseeds (+5.4%) and pulses (+4.8%), although shortfalls are forecast for coarse cereals (-15.2%) and rice (-7.6%).

Value of revived projects improved to a four quarter high Rs. 0.4 trillion in Q3FY16, 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.

Project completion declined by 12.8% on a year-on-year basis to `0.8 lakh cr in Q3FY16, which was dominated by electricity, transport services, constructio.

Contraction in industrial production for third month in a row in Jan 2016 is disconcerting, with one-off factors that impacted output in November 2015 (fewer working days) and December 2015 (Chennai floods) having dissipated.

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