- Drivers of Growth:
- Growth in India is being primary driven by private consumption and government spending.
- But other two engines of growth – investment and exports – have slowed down.
- Capital expenditure:
- Capex by government alone will be insufficient to revive the capex cycle of the economy.
- Its share in total capex of economy was only 11.1% during 2012-17.
- On the other hand, share of private corporations was 40.9%.
- Private corporations in combination with household sector command 77.5% of total investment in the economy, so their capex revival is important for broad-based recovery in the investment cycle of the economy.
- Consumption expenditure:
- Private final consumption expenditure is projected to grow at 7.6% in 2018-19 compared to 6.6% in 2017-18, while expansion of government final consumption expenditure is expected to slow down to 8.6% from 10.9% during the same period.
- Exports:
- The annual value of exports will touch $345 billion in FY19, crossing peak of $318 billion attained in FY14, but India will continue to face headwinds on the exports front.
- Rupee:
- It has already depreciated 7.7% till July 2018 in response to elevated global turbulence, worsening of current account deficit (CAD), rising inflation and concerns related to fiscal deficit.
- CAD:
- India’s currency account deficit to rise to 2.6% of GDP in 2018-19, up from 1.9 % in the last fiscal year.
- In absolute terms, it is expected to widen to $ 71.1 billion in 2018-19 from $48.7 billion in 2017-18.
- Mobilisation of $25 billion from non-resident Indians (NRIs), similar to funds raised in 2013, will be able to finance CAD.