India's real economic growth is expected to be 6.5% in the current fiscal year ending 31 March 2018 (FY2018), according to the Economic Survey 2017-2018 report released yesterday by the Finance Ministry.
However, this estimate has not fully factored in the latest developments in the third quarter of the fiscal year, especially as related to exports and government contributions to demand. Accordingly, real GDP growth for 2017-18 as a whole is expected to be close to 6.75%.
The FY2018 estimated GDP growth rate is lower that the average of 7.5% between FY2015 and FY2017. India can be rated as among the best performing economies in the world on this parameter.
With GDP growth of 6.0% in the first half of the current financial year, the implicit growth for the second half (H2) of the year works out to be 7.0%, indicating further recovery of the economy that began in Q2 of FY2018. Major macro indicators, namely, gross fixed investment and exports are also expected to grow at a faster pace in H2 vis-à-vis H1 of FY2018.
The Survey says that macroeconomic developments this year have been marked by swings. In the first half, that is from April to September 2017, India’s economy temporarily “decoupled,” decelerating as the rest of the world accelerated – even as it remained the second-best performer among major countries, with strong macroeconomic fundamentals. The reason lay in the series of actions and developments that buffeted the economy: demonetisation, teething difficulties in the new GST, high and rising real interest rates, an intensifying overhang from the TBS (Twin Balance Sheets involving public sector banks and some highly leveraged corporations) challenge, and sharp falls in certain food prices that impacted agricultural incomes.
In the second half of the year, the economy witnessed robust signs of revival. Economic growth improved as the shocks began to fade, corrective actions were taken, and the synchronous global economic recovery boosted exports.
The Survey said that the key question going forward is whether the economy has troughed, and if so at what pace it will recover toward its medium term trend. However, signs are that a robust recovery is taking hold as reflected in a variety of indicators, including overall Gross Value Added (GVA), manufacturing GVA, the Index of Industrial Production, gross capital formation and exports.
The report also says that India's insurance penetration has increased to 3.49% in FY2017 from 2.71% in 2001. The life insurance penetration was 2.72% and general insurance penetration was 0.77%, according to the Economic Survey.
The insurance density has increased to US$59.7 in FY2017 from $11.5 in 2001 - with life insurance density of $46.5 and general insurance density of $13.2. This compares to global average insurance density of $353 for life and $285.3 for non-life, it said.