Indian Economy

India emerged as the fastest growing major economy in the world, registering 7.6 per cent growth in the GDP at constant market prices in 2015-16. It is noteworthy that this growth is estimated to be achieved despite subdued global demand that dampened India’s exports significantly, and two consecutive below-normal monsoons that impacted farm output and productivity. Similarly, the growth rate of Gross Value Added for 2015-16 is estimated at 7.2 per cent vis-à-vis 7.1 per cent in 2014-15.

The growth in agriculture, industry and services is estimated at 1.2 per cent, 7.4 per cent and 8.9 per cent in 2015-16 as compared to (-) 0.2 per cent, 5.9 per cent and 10.3 per cent respectively in 2014-15.

Although agriculture registered low growth for the second year in a row on account of weak monsoons, it performed better than last year. An extended and strong El Niño resulted in a deficient south-monsoon and a long spell of dry weather in India. The prolonged moisture stress from it, in turn, impacted both kharif as well as the rabi crop.

A pick-up in industrial growth was mainly driven by acceleration in manufacturing sector which is estimated to grow at 9.3 per cent in 2015-16, as compared to 5.5 per cent in 2014-15.

Although services sector grew marginally lower in 2015-16 at 9.2 percent than in 2014-15, it remained the key driver of India’s economic growth, contributing almost 66.1 per cent of its gross value added growth in 2015-16 and was important net foreign exchange earner and the most attractive sector for foreign direct investment inflows. The slight slowing down was mainly due to the deceleration in growth of the combined category of public administration, defence and other services to 6.9 per cent from 10.7 per cent in 2014-15.

India has emerged as one of the strongest performers with respect to deals across the world in terms of Mergers and Acquisitions (M&A). The total transaction value of M&A involving Indian companies stood at US$ 26.3 billion with 930 deals in 2015 as against US$ 29.4 billion involving 870 deals in 2014.

From the demand angle, the growth in private final consumption expenditure at 7.6 per cent in 2015- 16 has been the major driver of growth. The growth of fixed investment improved from 4.9 per cent in 2014-15 to 5.3 per cent in 2015-16.

India’s exports have been declining since December 2014. In 2015-16, the growth of exports declined by 15.85 per cent (US$ 261.14 billion vis-à-vis US$ 310.34 billion in the previous year) mainly on account of subdued global demand. Imports for 2015-16 were valued at US$ 379.59 billion, 15.28 per cent lower as compared to US$ 448.03 billion in the previous year largely reflecting the decline in international petroleum prices. Imports of petroleum, oil and lubricants declined by 40 per cent in 2015-16 to US$ 82.7 billion, as compared to US$ 138.3 billion in the previous year, mainly due to the decline in international crude oil prices. Non-POL imports for 2015-16 declined by 4.12 per cent to US$ 296.93 billion, as compared to US$ 309.70 billion in the previous year.

Buoyant remittances supplemented the lower crude oil prices in reducing the current account deficit, and lower but the significant capital flows resulted in a sizeable capital account surplus. This resulted in increase in the stock of foreign exchange reserves, which stood at US$ 359.8 billion as on 1st April 2016.

The significant decline in the price of the Indian basket of crude oil, through direct and second round effects, contributed partly to the decline in general inflation for the second successive year. Headline inflation, based on the All India Consumer Price Index, dipped to 4.9 per cent during April-January 2015-16 as against 5.9 per cent in 2014-15.

Cereal inflation declined significantly from 5.2 per cent in 2014-15 to 1.7 per cent in 2015-16. The decline in food articles inflation during 2015-16 so far was mainly on account of a fall in the prices of cereals, vegetables, fruits, milk, egg, fish and meat. However, a spike in the prices of pulses on account of low domestic production kept foodgrain prices high.