No rapid economic turnaround next year: Crisil

Ratings agency Crisil says that there are no signs of the Indian economy sharply rebounding in the next financial year as the fiscal policy remains restrictive.

"For the economy, there is no sign of sharp turnaround in the coming fiscal. It needs support from accommodative monetary policy and less restrictive fiscal policy plus structural reforms," Crisil chief economist Dharmakirti Joshi told a gathering during the two-day India Rubber Meet - 2016 that began in Panaji, Goa today.

 He said leverage and non-performing assets (NPAs) of banks will remain a challenge in financial year 2016-17.

"The Narendra Modi-led government which is at its mid-point has a critical task of implementing the reforms during 2016-17, which were announced in 2015," Joshi said.

"Fiscal 2017 which will mark the mid-point of the Modi government will be closely watched for its success in getting the pending big ticket reform bills such as the GST (Goods and Services Tax) and Bankruptcy Code passed. The passage of these bills would not only be a big sentiment booster but is necessary to enhance country's medium-term-growth potential," he said.

Fiscal year 2016-17 is a "critical year" for reforms and implementation of the measures announced in FY16 by the Modi government, the official said.

"Big attention is required towards two sectors - power and banks," he said, adding that the NPAs, unless they are cleaned, will restrict the flow of credit into the system, and hence, will remain a constraint to growth.

"Unless they (NPAs) are cleaned up it would be detrimental to the growth. The arteries of the banking system need to be unclogged to ensure the smooth flow of credit," he said.

The agency has predicted that monsoon will also be a major factor to decide the consumption.

"At present consumption is only on one leg, that is urban. If it rains, rural consumption will grow.

 "What the Modi government has done in the Budget is that there is a clear focus on rural economy by introducing various measures that will also help the country's growth potential," Joshi said.

He opined that private consumption which is 55 per cent of the GDP would rise further during in FY17.

"We believe that some factors like the Pay Commission award (for government employees) and One Rank One Pension (for the armed forces) will increase spending power of certain sectors creating favourable environment to the private consumption," he said.