Analysts sceptical about achievability of survey targets

Last Updated: Friday, February 27, 2015, 22:45

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Mumbai: Analysts have welcomed the Economic Survey as it points to the strengthening of the macroeconomic fundamentals, even as some expressed scepticisms on achieving the growth targets spelt out in the annual document.

Economists at the domestic rating agency Care Ratings said the findings indicate "an improvement in the macroeconomic fundamentals of the nation, which is reflected both in temporal and cross-country comparisons."

The survey reflects a much larger fiscal headroom becoming available to the government on account of expected pick-up in growth, lower oil prices and better targeting of subsidies, PwC India partner for public finances Ranen Banerjee said.

However, rival consultancy firm EY India's chief policy advisor D K Srivastava sounded skeptically on the growth front saying lower tax collections will hamper the public investment assumptions.

"The survey's growth optimism is less convincing. It would require in an increase in the investment rate of 4-5 percentage points of GDP," he said.

The tone of the survey document is "cautious" and this is a signal that "a dramatic budget with big bang reforms is not envisaged," another consultancy Grant Thornton said.

KPMG India's Jaijit Bhattacharya termed the 8 percent growth target next fiscal as "audacious" but achievable because of the new way of computing GDP numbers.

He said the move to borrow only to invest in capital expenditure is very good as it will inculcate the fiscal discipline.

On the survey's comment to push the forex reserves till up to USD 1 trillion, he said it would be better to quantify it in terms of months of forex exposure that the country would have, including imports and repayments.Analysts have welcomed the Economic Survey as it points to the strengthening of the macroeconomic fundamentals, even as some expressed scepticisms on achieving the growth targets spelt out in the annual document.

Economists at the domestic rating agency Care Ratings said the findings indicate "an improvement in the macroeconomic fundamentals of the nation, which is reflected both in temporal and cross-country comparisons."

The survey reflects a much larger fiscal headroom becoming available to the government on account of expected pick-up in growth, lower oil prices and better targeting of subsidies, PwC India partner for public finances Ranen Banerjee said.

However, rival consultancy firm EY India's chief policy advisor D K Srivastava sounded skeptically on the growth front saying lower tax collections will hamper the public investment assumptions.

"The survey's growth optimism is less convincing. It would require in an increase in the investment rate of 4-5 percentage points of GDP," he said.

The tone of the survey document is "cautious" and this is a signal that "a dramatic budget with big bang reforms is not envisaged," another consultancy Grant Thornton said.

KPMG India's Jaijit Bhattacharya termed the 8 per cent growth target next fiscal as "audacious" but achievable because of the new way of computing GDP numbers.

He said the move to borrow only to invest in capital expenditure is very good as it will inculcate the fiscal discipline.

On the survey's comment to push the forex reserves till up to USD 1 trillion, he said it would be better to quantify it in terms of months of forex exposure that the country would have, including imports and repayments.

Meanwhile, American brokerage Citigroup Global Research said the Economic survey's projection of double digit growth trajectory, looks ambitious, but possible.

"Double-digit growth appears ambitious. However, in addition to ongoing reforms, the government has launched wide-ranging economic-social programmes like the Jan Dhan, Swachh Bharat, Make in India and Digital India schemes.

"Combined, we believe they should boost GDP by 1-2 percent, reduce CAD by 50-75 bps, bolster savings rate by 1-2 percent, reduce fiscal by 0.5-0.75 percent and could be nation changers," the report said.

Japanese brokerage Nomura said the key take-away is that while the government could adopt a fiscal rule and stick to medium-term fiscal consolidation, it could veer from the fiscal deficit target.

"While the government could adopt a fiscal rule (over a business cycle) and will stick to medium-term fiscal consolidation there is a risk that it could deviate from the 3.6 percent of GDP fiscal deficit target previously indicated for FY16, possibly targeting 3.8-3.9 percent of GDP instead," it said.