NEW DELHI • India's economy will sustain growth of more than 7 per cent in the next financial year, an official report said yesterday, as the government gears up to present its Budget for 2016-17 amid a growing clamour for promised reforms.
The Economic Survey, an annual report compiled by the Finance Ministry ahead of the Budget, said that gross domestic product (GDP) would expand by between 7 per cent and 7.75 per cent in the financial year beginning in April.
The relatively upbeat prediction comes despite a weak global economy, with a slowdown in China that has worried investors and other major emerging markets in recession.
India's GDP likely grew 7.6 per cent over the 2015-16 financial year, the government said, making it the world's fastest-growing major economy.
However, yesterday's forecast represents a paring down of expectations from last year's survey, which predicted growth would top 8 per cent this year and hit double digits in the medium term.
"Though the emerging-market economies have clearly slowed down, the Indian economy stands out as a haven of macroeconomic stability, resilience and optimism," the Finance Ministry said.
India's services sector remains one of the main engines of growth, expanding more than 9 per cent in the current fiscal year, the survey said, despite a massive drive to boost manufacturing.
Prime Minister Narendra Modi has made it a priority to boost India's economic growth, vital for lifting millions out of poverty, since sweeping to power in the May 2014 election.
But investors have raised concerns about the pace of promised reforms needed to create jobs for India's tens of millions of young people.
And while its growth has outpaced that of powerhouse China in recent quarters, Asia's third-largest economy still faces challenges.
After cooling from previously high levels, India's once exorbitant inflation has ticked up again over the past few months, with prices rising 5.7 per cent last month.
India's main stock index has lost a fifth of its value over the past year, private investment is weak and the rupee is trading at near-record lows against the US dollar.
Investors will be looking to Monday's Budget for concrete reforms from the business-friendly government. There are hopes that the government will move to overhaul the complex corporate tax regime seen as off-putting to investors.
The survey also said the government probably succeeded in reducing its fiscal deficit to 3.9 per cent of GDP in 2015-16, as economists expect. It remains to be seen whether Finance Minister Arun Jaitley will look to relax the stringent fiscal deficit reduction target for next year when he presents the Budget.
In recent years India has managed to narrow its high fiscal deficit - the amount by which a government's spending exceeds its income. But it still has high government debt compared with its developing-country peers, with borrowings at 64 per cent of GDP in 2015-16, according to ratings agency Moody's.
The country is also dogged by concerns over the reliability of its economic growth data, a year after the government introduced a revised formula for calculating GDP which some analysts have criticised.
The government says the new method is closer to international standards.