SECTION 3: OUTLOOK FOR 2017—18

As per the CSO, the economy is estimated to grow by 7.1 per cent in 2016– 17, however, it is based on first 7 to 8 months of the year only. Thus, it unlikely to have captured the impact of the ‘denomination’ of currency— though difficult to precisely pinpoint on GDP, there are chances of downward revisions in coming estimates of the CSO. Inflation could also be lower than what comes out from the implicit GDP deflator underlying the CSO’s first advance estimates. The outlook for the upcoming year 2017–18 is expected to be as given below:

• Growth would return to normal as the new currency notes in required quantities come back into circulation and as follow up actions to demonetisation are taken.

• Helping to maintain the momentum of growth will be factors like possible normal monsoon, an increase in the level of exports following the projected increase in global growth and above all various reform measures taken by the Government to strengthen the economy.

• Some possible challenges to growth exist—the prices of crude oil have started rising and are projected to increase further in the next year. Estimates suggest that oil prices could rise by as much as one sixth over the 2016–17 level, which could have some dampening impact on the growth.

• Fixed investment rate in the economy has consistently declined in the past few years, more so the private investment. Raising the growth rate of the economy will to a great extent depend on quickly reversing this downward trend in the investment.

• The last few years have also witnessed a slowdown in global trade and investment flows. Although, India has not been particularly affected by this slowdown, lower growth in foreign portfolio investment cannot be ruled out, partly on account of the fact that the interest rates in the United States have begun to increase.

• On balance, there is a strong likelihood that Indian economy may recover back to a growth of 6.75 per cent to 7.5 per cent in the year.