RBI survey projects India's 2015-16 economic growth at 7.9%

A Reserve Bank of India (RBI) survey of professional forecasters has projected India's economic growth rate at 7.9 per cent for the current financial year, up from 7.5 per cent in 2014-15.

Economic growth, calculated in terms of gross value added (GVA), at base price, is expected to increase by 7.9 per cent in 2015-16, led by a 10.1 per cent growth in service sector, according to RBI's estimates based on inputs from professional forecasters.

Forecasters expect real gross value added (GVA) at base price to increase by 7.5 per cent in 2014-15. 'Agriculture and allied activities' and 'services' are expected to grow by 1.1 per cent and 10.6 per cent, respectively. 'Industry' growth forecast has been placed at 5.9 per cent.

In 2015-16, GVA is expected to increase by 7.9 per cent, led by a 10.1 per cent growth in 'services'.

In terms of probabilities, forecasters ascribed maximum 57 per cent chance that GVA growth in 2014-15 will be in the range of 7.0-7.4 per cent, and another 27 per cent probability that it will be in the range of 7.5-7.9 per cent. For the year 2015-16, GVA growth in 7.5-7.9 per cent range is the most probable outcome.

Private final consumption expenditure at current prices has been projected to increase by 12.9 per cent in 2014-15 and further by 13.0 per cent in 2015-16.

Gross saving rate is projected at 30.0 per cent of GNDI in 2014-15 and is expected to improve to 31.0 per cent of gross national disposable income (GNDI) in 2015-16.

Forecasters expect gross fixed capital formation rate at 28.6 per cent of GDP in 2014-15 and 29.3 per cent of GDP in 2015-16.

Private final consumption expenditure has been forecast to grow from 12.9 per cent in 2014-15 to 13.0 per cent in 2015-16.

Gross saving rate (as per cent of GNDI) is projected to grow from 30.0 per cent in 2014-15 to 31.0 in 2015-16.

Both money supply and bank credit growth expectations declined in this round. While money supply (M3) is expected to increase by 12.3 per cent in 2014-15 and further by 13.5 per cent in 2015-16, bank credit is expected to expand by 12.0 per cent in 2014-15 and further by 14.0 per cent in 2015-16.

Gross fiscal deficit (GDF) of the central government is projected at 4.1 per cent of GDP in 2014-15 and is expected to moderate to 3.9 per cent of GDP in 2015-16. The combined GFD of central and state governments is projected at 6.5 per cent of GDP in 2014-15 and is expected to improve to 6.3 per cent of GDP in 2015-16.

Merchandise exports from the country are forecast to grow at 2.0 per cent in 2014-15, down 250 bps from the 4.5 per cent growth recorded in the previous round. Growth of merchandise exports is expected to improve to 3.4 per cent in 2015-16.

India's current account deficit is projected at 1.2 per cent and 1.0 per cent (of GDP) in 2014-15 and 2015-16, respectively. Capital account balance is expected at 3.5 per cent of GDP for 2014-15.

Quarterly forecasts
Real GVA growth is expected to improve gradually from Q4 of 2014-15 to Q4 of 2015-16 and is likely to increase at over 7.5 per cent. Service sector output is expected to increase by around 10.0 per cent till Q4 of 2015-16.

Headline CPI (combined) inflation is expected to increase from 5.2 per cent in Q1 2015-16 to 5.8 per cent in Q4 of 2015-16.

In line with the headline inflation, the forecasters expects core CPI (defined as excluding food and fuel) to increase gradually from 4.2 per cent in Q1 of 2015-16 to 5.2 per cent in Q4 of 2015-16.

WPI inflation is expected at (-) 0.3 per cent in Q1 of 2015-16, which is likely to increase to 3.0 per cent in Q4 of 2015-16.

Forecasters assigned maximum probability of 66 per cent that CPI headline inflation will be in the range 5.0-5.9 per cent in March 2015. Similarly, for March 2016, the forecasters assigned maximum probability of 63 per cent that CPI inflation will be in the range of 5.0-5.9 per cent.

The rupee is expected to remain stable against the US dollar within the range of Rs63.00 per dollar to Rs64.00 per dollar during the year 2015-16.

Long term growth
Over the next five and ten years, real GVA growth is expected to be around 8.0 per cent and 8.25 per cent, respectively.

The average CPI inflation rates forecast for the next five and ten years are expected at 5.3 per cent and 5.0 per cent, respectively. Over the next five and ten years, WPI headline inflation is expected at 4.0 per cent and 3.75 per cent, respectively.

RBI said 27 professional forecasters participated in the latest survey round (Round 33) conducted in March 2015.