Economic growth is picking up with the impact of GST rollout and notes ban dissipating, Arvind Subramanian, chief economic advisor at finance ministry, said today. Finance Minister Arun Jaitley earlier in the day tabled the Economic Survey, which forecasts growth to accelerate to between 7 per cent and 7.5 per cent in the next fiscal year, starting April 1, 2018. "The temporary impact of GST and demonetisation has dissipated. Directionally, economy is picking up nicely and exports have picked up quite briskly in last three quarters," Dr Subramanian said at a media briefing.
For the current fiscal year ending March 31, 2018, the Economic Survey projects a growth rate of 6.75 per cent, higher than the Central Statistics Office's outlook of 6.5 per cent.
Referring to the growth slowdown witnessed in the past few quarters, Dr Subramanian said: "For a period, India was accelerating while the world was decelerating. From middle of 2016, a kind of reverse process happened."
The "temporary decoupling" happened due to the impact of demonetisation and the GST rollout, Dr Subramanian said. Exports decelerated sharply while imports accelerated sharply, the chief economic advisor noted. Higher interest rate impacted demand while higher oil prices also hurt consumption and government finances, he added.
Dr Subramanian also highlighted the key takeaways from 2017-18, including the landmark launch of GST, recapitalisation of state-run banks and the ongoing resolution of bad loans under the bankruptcy code.
"Not only was it (GST) launched. One of the remarkable thing was the mid-course corrective action which has led to stabilisation of GST," Dr Subramanian said. He also said that private investment, which has been a drag for the past few years on GDP growth, could also pick up if bad loans are resolved faster.
Rising oil prices remains a risk to growth, he said. "Every $10 dollar rise in crude oil price impacts GDP growth by 0.02-0.3 per cent," Dr Subramanian said. He also pointed to risks from elevated stock prices.
"Policy vigilance will be necessary in the coming year, especially if high international oil prices persist or elevated stock prices correct sharply, provoking a sudden stall in capital flows," the Economic Survey said.