Economy: Report Indicates India Has Hit Inflection Point But The Next Steps Are Critical


The slowdown in the Indian economy has bottomed out but the pace of recovery would "critically depend" on the initiatives that the government takes from now onwards, says a report by D&B.

Demonetisation and GST's effects transient?

According to Dun & Bradstreet's latest Economy Observer Index, post the impact of the structural reforms like demonetisation and GST, there has been improvement in some parameters in the recent period.

"We believe that the slowdown has bottomed out, however, the stage and pace of recovery would critically depend on the initiatives that the government takes from now onwards to boost the growth momentum, especially the private sector investment, without which we will not be able to aim for an ambitious growth rate," Dun & Bradstreet India Lead Economist Arun Singh said.

Singh noted that though the impact of structural reforms like demonetisation and GST was very much expected, the quantum was not estimated.

"There has been improvement in some parameters in the recent period, and we hope that the rebound in industrial production, especially in capital goods is not just driven by festive led demand and is on a sustainable basis," Singh noted.

Where will the recovery come from?

The report noted that recovery in exports, moderate interest rate, lower inflation rate, controlled trade deficit,sizable FDI inflows and the government's commitment towards fiscal discipline are likely to pave the way for the economy to recover from the current scenario on a strong note.

Moreover, the fundamental consumption story of India remains undented and the revival in the rural economy will provide further boost.

"It is also expected that the continued reforms aimed at the formalisation and increase in accountability in the economy will help in preventing leakages and flow of resources in the desired direction and provide a strong foundation for a robust and sustainable growth process," Singh said. D&B expects Index of Industrial Production (IIP) to grow by 4.0-4.2% during September this year.

On the price scenario, D&B expects the CPI inflation to be in the range of 3.3-3.5% and WPI inflation to be in the range of 2.7-2.9% during October respectively, the report said.