Budget 2013: Analysts paint a cautious picture of economy

New Delhi: The economic survey released by the government today paints a “cautiously optimistic” picture of the economy and suggests that the government will present a fiscally prudent budget tomorrow, analysts say.

The survey, tabled by Finance Minister P Chidambaram in Parliament, projected an optimistic growth rate of 6.1-6.7 percent for the 2013-14 claiming that the downturn is more or less over and economy is looking up.

[caption id=“attachment_642597” align=“alignleft” width=“380”] According to the Survey, GDP growth will be 5 percent this fiscal. AFP[/caption]

“The survey paints a cautiously optimistic picture of the economy and holds out hope for the future,” Nomura Economists Sonal Varma and Aman Mohunta said in a research report. Echoing similar sentiments Deloitte India Senior Director Anis Chakravarty said “the Economic Survey 2012-13 released today provides a candid view of the economy and clearly recognises the need for reforms.”

More from Economy

Inflation likely to be a big focus area for budget 2024, say sources Explained: Will the Bank of Japan break tradition and raise interest rates?

Though problem areas are recognised, the survey seems to provide a sense of optimism within the current macroeconomic framework, analysts believe. “Though it provides an optimistic target of 6.1 percent to 6.7 per cent as GDP growth for the next fiscal, one may conclude that this range is quite wide,” Chakravarty said adding that “this sends a message that growth will be driven by reforms and global prospects”.

The Nomura report further said that “the survey suggests that the government will present a fiscally prudent budget. We expect the government to project a fiscal deficit of 4.6 percent of GDP in FY14 from 5.3 percent in FY13.”

According to PwC India Executive Director Ranen Banerjee “the economic survey highlights importance of human capital - that is investment in human capital, innovation and knowledge development being the next key drivers of growth.” Banerjee further said there are poor signals on all fronts of the economy and it will be interesting to see how the Union Budget attempts to improve the situation.

Commenting on the Economic Survey, Standard Chartered bank Senior Economist Anubhuti Sahay said: “The survey has rightly stressed on the urgent need to restore the domestic macro-economic balances in place.” “The adverse impact of inflation is well reflected in lower savings rate, wider CAD and still elevated interest rates for investments,” Sahay added.

Commenting on the Survey, India Ratings Chief Economist and Head of Public Finance Devendra Kumar Pant said, while the report reiterates slowdown, it also supplements the Government’s commitment of minor slippage in fiscal deficit and that the way out is a credible fiscal consolidation plan which can help lead to macroeconomic and price stability.

According to the Survey, GDP growth will be 5 percent this fiscal, the lowest in a decade, before improving to 6.1-6.7 percent in FY14. One reason for this low decadal growth, Pant said, is driven by the lowest growth in Government consumption since FY07 in the current fiscal at 4.1 percent, which is evident form the large cash balance of the Government and this will help in tying fiscal deficit to 5.3 percent of GDP.

Lauding the survey for suggesting curbs on subsidies, especially that of oil, Pant said he expects more measures in the tomorrow’s Union Budget on this front.

PTI