India forecasts faster economic growth, warns of fiscal challenge


India’s government predicted that economic growth will pick up to between 6% and 6.5% in the fiscal year beginning April 1, after falling to more than a decade-low this financial year.

India saw growth drop to 4.5% in the July-September quarter – its lowest level in 26 quarters. Consequently, the budget deficit for the upcoming fiscal year may need to exceed this year’s target of 3.3% of gross domestic product, the government said in an economic survey released on Friday.

India should rationalize food subsidies, push exports and adopt counter-cyclical fiscal policy to boost sluggish demand, Krishnamurthy Subramanian, chief economic adviser to the finance ministry, said in the report.

But he warned that expanding fiscal deficit targets would pose a risk of “crowding out private investments” and slower growth in consumer demand amid continued global trade tensions.

The government estimates gross domestic product will grow 5% this fiscal year, which ends on March 31. That would be the slowest growth since the global financial crisis of 2008-09.

The survey urged the government to use its majority in parliament to speed reforms to boost investments and recovery.

Some economists believe the survey’s growth forecast is too optimistic. They point out recovery remains fragile, inflation is accelerating, and consumer demand and investments are likely to decline,…


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