The Economic Survey in February had predicted India’s real GDP growth to be within 6.75% and 7.5%. The volume 2 version of the survey recently unveiled has ruled out the possibility of attaining the upper end of the growth forecast. The reason is that new factors have emerged causing a deflationary trend. These factors have come up after February 2017 and these include farm loan waivers, implications of the GST, appreciation of the rupee in real terms hitting exports, worsening condition of power and telecom companies as well as agrarian stress. The apprehension in volume 2 means a second year of decline from 8% in 2015-16 and 7.1% in 2016-17. The upshot of the decline may be political. Growth is fine but pointless without jobs and incomes. If growth, investment and job creation do not show signs of improvement, that may affect the next elections which are 20 months away and the BJP’s roller coaster ride may be arrested. Volume 2 is also skeptical about the average of 7.5% growth for the last two years. The Survey states that no other country has achieved two years of 7% average GDP growth and that in spite of weak investment, export and credit off-take. Even this growth is hardly sustainable. New factories, companies and jobs have to be created.
The Modi government should see the new assessment in Volume 2 as a danger signal. There have been notable reforms in the last 3 years. But ensuring growth in the foreseeable future is of the utmost importance.
