India to Head On With 7.6 Percent Growth
A new United Nations report on the economic growth prospects for India in the current year states that it expects GDP growth to be 7.6%. This is rather higher than the 5% rate predicted for the Asia Pacific region as a whole.
“India’s economy is projected to sustain a 7.6% growth rate in both fiscal years 2016-17 and 2017-18,” according to the year-end update of the Economic and Social Survey for Asia and the Pacific 2016 report of the United Nations, RT reported.
While India saw a contraction in fixed investment in the second quarter of 2016, the UN study expects a rebound, given the continuing structural reforms by the government. “Initially, growth will be driven by a rebound in agriculture due to normal monsoon rain, which along with civil service pay revisions will support broad-based consumption growth,” the report said.
“Later, growth will be underpinned by a recovery in private investment as the recent push to accelerate infrastructure spending and measures to create a better investment climate—due in part to the passage of the goods and services tax and bankruptcy code,” it added.
The study praised India and China as leading anchors of sustainable economic growth in the Asia-Pacific region and the world while other countries fail to keep up growth pace.
“With developed economies losing some of their recovery momentum, the region’s high and steady growth rate, led by China and India, has arguably been an anchor of stability for the struggling global economy,” it said.
However, it predicted the Chinese economy would grow 6.4%, lower than the 6.5-6.7% that Beijing wants.
Terming the steps announced by Prime Minister Narendra Modi in his address to the nation on New Year’s Eve as ‘extremely positive for the Indian economy,’ apex industry body Assocham on Tuesday said that the focus should now be on effective implementation of these schemes to drive economic growth.
“The initiatives like the 60-day interest waiver for farmers who have taken loans from district cooperative banks and primary societies together with additional funds as loans to farmers would help in alleviating pains of farmers and rural class,” said Assocham president Sunil Kanoria.
He also said that schemes like interest subsidy on loans for low cost housing, together with impetus to affordable housing, will provide much needed help to vulnerable sections of society and revive consumer confidence amid largest, but poorest socio-economic groups.
Further, the push towards low cost housing is also good news for retail portfolio of banks and non-banking financial companies that have been struggling to boost their business amid economic slowdown.
Rates Cut to Boost Economy
Indian banks, led by market leader State Bank of India, announced sharp cuts to their lending rates after a recent surge in deposits, raising hopes that lower borrowing costs will help spark credit growth in Asia's third-largest economy.
SBI, the country's biggest lender by assets, said on Sunday it had cut its so-called marginal cost of funds-based lending rates by 90 basis points, while unveiling new products for mortgage loans, one of the fastest-growing areas.
Several other lenders including Punjab National Bank, Union Bank of India, Kotak Mahindra Bank and Dena Bank also cut their lending rates by 45-90 basis points across tenures. Analysts expect more lenders to follow suit. ICICI Bank, which is among the top three home loan providers, has cut its home loan rate by 45 basis points.
The Confederation of Indian Industry said that the rate cuts will play a key role in the process of economic strengthening in the medium term.
"As loans become cheaper, sectors such as consumer durables, automobiles and housing should see a recovery. Various measures have been taken to encourage lending to the SME sector. We expect start-ups and SMEs to play a major role in the next growth cycle," CII Director General Chandrajit Banerjee said.
Bank lending is likely to pick up significantly, as deposit mobilization has been strong following demonetization, he added.