India's economy is expected to expand 7.6 per cent in the current fiscal helped by a pick-up in rural demand on the back of better monsoon rains and "positive signals" on the manufacturing front, says the National Council for Advanced Economic Research (NCAER).
India's GDP had expanded at 7.6 per cent in 2015-16 as well, according to the think-tank.
NCAER based its estimates on the anticipated improvement in the agricultural sector and the associated increase in rural demand.
Also, according to NCAER, the manufacturing sector is giving positive signals with Purchasers' Managers Index, index of core sector industrial production and auto sales going up.
Also, the domestic aviation sector growth continues to be robust.
"However, other service index indicators continue to be muted. Food inflation is also showing signs of dampening in the latter part of the second quarter. However, fuel inflation may revive. Although urban demand is predicted to remain strong, external demand continues to be volatile," NCAER said in statement.
NCAER projection show that the output of kharif foodgrains will increase 10 per cent to 11 per cent over last year's output of 124 million tonnes.
One retarding factor is India's fiscal position that remained under stress during first half of the current fiscal. Despite healthy growth in tax revenues, the combination of rising expenditure and lower-than-expected non-tax revenues is likely to "test the government's resolve" to abide by the fiscal deficit target set out in Budget 2016-17, NCAER stated.
Set up in 1956, the National Council of Applied Economic Research (NCAER) undertakes contract research with the government, the private sector and the non-government sector and institutions at the national and international level.