India may see 7% economic growth in 2018: ASSOCHAM

After ”disruptions" like lingering demonetisation effect and goods and services tax (GST) roll-out, the Indian economy may reach a 7 per cent growth in 2018 with government policies tilting towards the stress-ridden rural landscape in 2018, the Associated Chambers of Indian Industry (ASSOCHAM) pointed out in its Year-Ahead Outlook (AYAO).

Illustration: Archiv

Against a gross domestic product (GDP) growth of 6.3 per cent in the second quarter of 2017-18, the economic expansion may reach the crucial 7 per cent mark by the end of September 2018 quarter, while inflation may range between 4-5.5 per cent towards the second half of the next calendar year with the Monsoon being a key imponderable, said the forecast.

In the run-up to the state assembly elections in Karnataka, Rajasthan, Chhattisgarh and Madhya Pradesh, the political economy is set to tilt towards the farm sector, which has been witnessing some stress. The stress in the agriculture sector is traceable to lack of reforms in the rural economy.

The tilt toward farmers may be visible in the next budget while industrial focus would be on job-creating sectors. There will be a rise in merchandise exports and the current account deficit may remain well below 2 per cent.

The projections are based on the assumption of stale foreign exchange rates and government policies, good monsoon, pick-up in industrial activity and credit growth. The worries regarding crude oil prices rising are likely to abate, if there are no fresh geo-political shockers, an ASSOCHAM press release quoted president Sandeep Jajodia as saying.

While the underlying bullish sentiment should continue to prevail in the Indian stock market in 2018, the returns on equity may not be as robust as in 2017. Weak base of corporate earnings in sync with the lowering of GDP growth in later part of 2017 would also help the revival in the year ahead.

Overall, the year 2018 would be a year of consolidation and corporate balance sheets should look much healthier than 2017, the report added. 

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