The Indian Economy Limbers Up

The Indian Economy Limbers Up

- Minhaz Merchant

AS THE BJP AND Congress internalise the lessons of the 2017 Gujarat assembly election, two questions arise. First, how will Prime Minister Narendra Modi calibrate his strategy for the final year of his tenure? Second, can he balance the urgent need to focus on the economy with the task of leading a strong campaign for a slew of eight state elections due in 2018?

Clearly, the economy will weigh on his mind. Jobs are critical. Restoring growth to 7.5-8 per cent is equally vital. Gross Domestic Product (GDP) growth in 201718 will probably be around 6.70 per cent. That is a disappointing number but statistically the most likely outcome at the end of a difficult year. The GDP growth in April-September 2017 averaged six per cent. Assuming an average 7.30 per cent growth in the second half of the current fiscal (October 2017-March 2018), fullyear GDP growth will at best settle at 6.70 per cent.

An uptick in the economy can be driven when four factors converge: one, a rise in the savings rate; two, a spurt in consumer-led consumption; three, a rise in exports; and four, renewed bank lending to corporates to spur private sector investment.

Recent figures on the economy present a mixed picture. Growth in the Index of Industrial Production (IIP) slowed to 2.2 per cent in October 2017 after recording a healthier 4.1 per cent growth rate in September 2017. The November 2017 IIP, following the festive season, could deliver better numbers. An early indication of that is the spurt in car sales in November 2017. A total of 19,39,671 vehicles (passenger, commercial, two-wheelers and three-wheelers) were sold in November 2017 against 15,63,658 vehicles sold in November 2016, a rise of 24.05 per cent.