India's economy is expected to grow by 7-7.5% in the 2016-17 fiscal year, according to the Economic Survey results released on 26 February in parliament. The survey also revealed that GDP growth in 2015-16 would be 7.6%, reportedly making it the fastest growing economy in the world.
The 2014-15 year saw a GDP growth of 7.2%, while the fiscal year before that saw a growth of 6.6%. The jump from 7.2% to 7.6% in just one year is what will secure India's position as the fastest growing economy in the world. The survey predicted that GDP growth could accelerate to 8% within two years. Despite lower than predicted GDP growth rates for 2015-16, the report stated that "the fiscal deficit target of 3.9% of GDP seems achievable".
However, the survey also warns that India's growth could suffer if the world economy remains weakened. India's exports have been declining for 14 months due to low global demand and it is predicted that a continuation of a weak export market would have a severe impact on India's overall GDP growth.
At present, India's economy growth is relying on several domestic factors, including increased spending from higher wages, as well as allowances of government workers if the 7th Pay Commission is implemented. A return of normal monsoon seasons would also impact GDP growth favourably.
The survey also cautioned: "One of the most critical short-term challenges confronting the Indian economy is the twin balance sheet problem – the impaired financial positions of the public sector banks and some corporate houses. The twin balance sheet challenge is the major impediment to private investment and a full-fledged economic recovery."
The survey also stresses that major investments in health and education are needed in order to make full use of India's demographic. It also notes that India cannot afford to neglect the agricultural industry, with production of food grains estimated to be 253.2million tonnes in 2015-16, only a slight increase from the year before (252million tonnes).
India's Finance Minister Arun Jaitley is due to present the annual budget on 29 February. The budget comes amid tension between policymakers who have been unable to agree on whether or not to abandon deficit reduction targets in order to boost the country's economy.