Economic Outlook Survey

September 2015

FICCIs Economic Outlook Survey: GDP growth at 7.6% for 2015-16

Results of FICCIs latest Economic Outlook Survey indicate moderation in GDP growth estimates. Based
on the responses received, the median GDP growth forecast for the fiscal year 2015-16 has been put at
7.6%. This is marginally lower than the GDP growth estimate of 7.8% reported in the previous round.
FICCIs Economic Outlook Survey is conducted among eminent economists belonging to the industry,
banking and financial services sector.
According to the latest forecasts, growth estimates for agriculture and allied activities and service sector have
noted moderation, vis-a-vis the estimates reported in the previous round. However, no change was noted in
the growth estimate for the industrial sector in the present round.
Estimates for 2015-16

Growth (in %)
GDP@ market prices
GVA@ basic prices
Agriculture & Allied
activities
Industry
Services

(Median forecasts)
Latest Round
Previous Round
7.6
7.8
7.7
7.9
2.1
3.2
6.5
9.8

6.5
10.3

As per the latest data from the Indian Meteorological Department, there has been a deviation of about 12%
(June 1 to August 27, 2015) in the monsoon rain from the long period average. This might dampen agriculture
sector growth prospects in the current year to some extent. Also, the latest data on Indias water reservoirs
indicates lower reserves when compared to last year.
As for services, the median growth forecast for the sector has been put at 9.8% in 2015-16, with a minimum
and maximum range of 9.2% and 11.6% respectively. The moderation in median forecast for the services
sector, to some extent, can be attributed to a slowdown in service exports. Service exports have witnessed
contraction for four consecutive months (between April and July 2015). Nonetheless, growth estimate for the
sector can see some improvement in the months ahead. The anticipated pickup in industrial growth is likely
to support the trade, hotel, transport and communication segment. In addition, recent reforms announced by
the Government to transform public sector banks and the Reserve Banks in principle approval for payment
banks is expected to give some thrust to the financing and business services sector.
Further, as for the quarterly estimates, the median GDP growth forecasts for Q1 and Q2 2015-16 have been
indicated at 7.2% and 7.3% respectively in the current survey.
The participating economists were asked to give their prognosis about the global situation and the expected
impact on India. A majority of the economists participating in the survey felt that prospects for advanced
economies remain muted and with China slowing down, the emerging market group would register further
moderation. The sudden devaluation of yuan by China has taken the world by surprise and has caused
volatility in the financial markets. This reflects a more entrenched weakness in China than what was being
anticipated. The economists felt that the direction of the global recovery course would become clearer by end
of this year.
About the expected impact on Indias economy, the participating economists were of the view that some spill
over from the global developments will be inevitable. Exports have been witnessing a contraction and this
remains a major worry. Foreign institutional investors have been in the selling mode owing to the recent
global developments. India would have to remain cautious given the volatility in foreign exchange markets,
the probable stance of US Federal Reserve on interest rates and the continued monetary easing in other parts
of the world.

Economic Outlook Survey

September 2015

However, India is expected to steadily move towards further recovery, but much would be contingent on
Government continuing the reform process and the progress achieved on implementation.
The economists were of the view that resolving domestic issues and undertaking pending reforms would be
critical. Also, it was suggested that the emerging markets should explore and leverage greater opportunities
through trade and investments.
The median growth forecast for IIP has been put at 5.0% for the year 2015-16, with a minimum and
maximum range of 3.2% and 6.0% respectively. There has been no change in the median forecast for IIP vis-vis the previous survey.
Also, the outlook of the participating economists on inflation remained moderate. The median forecast for
Wholesale Price Index based inflation rate for 2015-16 has been put at 0.7%, with a minimum and maximum
range of (-) 1.0% and 1.3% respectively. The Consumer Price Index has a median forecast of 5.1% for 201516, with a minimum and maximum range of 4.8% and 6.0% respectively.
The manufacturing activity has indicated some uptick but the pace of revival remains gradual and volatile.
The Reserve Bank of India has cut the repo rate by 75 bps between January and June this year. However, the
corresponding decline in the lending rates by Banks has been to the tune of 25-30 bps.
Given that, we asked the views of economists on the kind of environment the banks would require for
bringing down the lending rates. According to the economists participating in the survey, an improved
transmission will be contingent upon a pickup in stalled projects and a sustained recovery in the economy.
The transmission by banks has been gradual given the underlying environment of uncertainty.
Besides, the banks have been under significant stress owing to rising non-performing assets. Also, the
economists participating in the survey indicated that the cost of raising funds for banks has been high and the
banks have been under pressure to maintain their net interest margins.
Amidst the above scenario, the recently announced seven point strategy by the government to transform
Public Sector Banks was much required. De-stressing the Public Sector Banks remains a key focus area both
for the Government and the Reserve Bank of India.
Lastly, the participating economists were also asked to share their opinion on the ways to enhance
investment prospects in States. States are the building block of the nation and their role in achieving Indias
growth aspirations is indispensable. The respondents were of the opinion that the first and foremost thing for
enhancing prospects of States is to resolve policy log jams on certain imperative issues such as land
acquisition, goods and services tax etc.
States should accelerate the process of infrastructure development as the sector has huge forward and
backward linkages. Public Private Partnerships should be encouraged and the States should build a conducive
environment for facilitating the same.
Given the huge diversity, each of the States has its own comparative advantage; the same should be identified
as the States Unique Selling Point (USP) and should be made a part of its core development strategy. Further,
sectors with high growth and high employment potential like medium and small industries, tourism need to
be focused on.

Economic Outlook Survey

September 2015

Survey Profile
The present round of FICCIs Economic Outlook Survey was conducted in the month of July/August 2015 and
drew responses from leading economists representing industry, banking and financial services sector. The
economists were asked to provide the forecast for key macro-economic variables for the year 2015-16 as well
as for Q1 (April-June) FY16 and Q2 (July-September) FY16.
In addition, economists were asked to share their prognosis about the global economy given the recent
developments and their likely impact on India. The economists were also asked to share views on the kind of
environment the Banks would require for bringing down the lending rates and the key areas that need to be
focused on at the State level in order to enhance the investment prospects.
Survey Results: Part A
Projections Key Economic Parameters
National Accounts
GDP growth at 2011-12 prices
Annual (2015-16)

Q1 2015-16

Q2 2015-16

Growth (in %)

Median

Min

Max

Median

Min

Max

Median

Min

Max

GDP@ market prices

7.6

7.5

7.7

7.2

6.9

7.4

7.3

7.2

7.5

GVA@ basic prices

7.7

7.5

7.9

7.1

7.1

7.2

7.3

7.2

7.8

Agriculture & Allied

activities
Industry

2.1

0.8

3.5

1.0

0.6

1.2

1.1

0.9

2.0

6.5

6.1

6.9

6.0

5.8

6.3

6.1

5.8

6.7

Services

9.8

9.2

11.6

9.4

9.0

10.3

9.7

8.5

10.6

Based on the responses received for the latest round of FICCIs Economic Outlook Survey, the annual
median GDP growth for 2015-16 is estimated at 7.6%. This indicates a downward revision from 7.8%
growth projected in the previous round.
The median growth forecast for agriculture and allied activities has been put at 2.1% for 2015-16, with a
minimum and maximum growth estimate of 0.8% and 3.5% respectively. Industry and services sector are
expected to grow by 6.5% and 9.8% respectively in the current fiscal year.
The quarterly median forecasts indicate a GDP growth of 7.2% in Q1 2015-16 and 7.3% in Q2 2015-16.

Gross Fixed Capital Formation as % of GDPMP

(in %)
FY16

28.5

Q2 FY16

28.2

Q1 FY16
27.6

28.0
27.8

28.0

28.2

28.4

28.6

The ratio of Gross Fixed Capital Formation to GDP

for 2015-16 has been projected at 28.5%. The
actual number in the fiscal year 2014-15 was
reported at 29.9%.

Economic Outlook Survey

September 2015

Index of Industrial Production (IIP)

The median growth forecast for IIP was put at
5.0% for 2015-16 by the participating
economists, with a minimum and maximum
range of 3.2% and 6.0% respectively.

IIP: Growth (in %)

FY16

5.0

Q2 FY16

The latest IIP data reported an uptick in growth

in the month of June 2015. The actual IIP growth
in Q1 FY16 has been reported at 3.2%. This is
marginally lower than the estimate of 3.4%
according to our survey results.

4.5

Q1 FY16

3.4
0.0

2.0

4.0

6.0

Wholesale Price Index (WPI) & Consumer Price Index (CPI)

Wholesale Price Index (in %)

Consumer Price Index (in %)

0.7
5.2
5.2
5.2
5.2
5.1
5.1
5.1
5.1
5.1
5.0

0.5
0
-0.5

Q1 FY16

Q2 FY16

FY16

-1
-1.5
-2
-2.5
-3

-2.4

-2.5

5.2

5.2

5.1

Q1 FY16

Q2 FY16

FY16

Wholesale Price Index based inflation rate is estimated at 0.7% in 2015-16, with a minimum and maximum
range of (-) 1.0% and 1.3% respectively.
Consumer Price Index has a median forecast of 5.1% for 2015-16, with a minimum and maximum range of
4.8% and 6.0% respectively. In the previous survey round, the CPI forecast for this fiscal year was put at
5.5%.
Fiscal Deficit
Fiscal Deficit as % of GDP

The median forecast for fiscal deficit to GDP ratio

was put at 3.9% for the fiscal year 2015-16. The
participating economists believe that the
Government will be able to meet the set target of
3.9% deficit ratio as announced in the Union
Budget 2015-16.

5.0
4.0

3.2

3.5

3.9

3.0
2.0
1.0
0.0
Q1 FY16

Q2 FY16

FY16

Economic Outlook Survey

September 2015

Money and Banking

Money Supply (M3): Growth (in %)

FY16

Bank Credit: Growth in %

FY16

12.0

Q2 FY16

Q2 FY16

11.5

Q1 FY16

9.5

Q1 FY16

11.0

10.5

11.5

11.0

11.5

12.0

9.0

0.0

12.5

5.0

End of Q2 2015-16

15.0

End of 2015-16

7.25%

Repo Rate

10.0

7.0%

External Sector
Export
USD billion

Import
USD billion

Q2
2015-16

69.7

104.7

2015-16

324.3

478.0

Export growth has been on a downtrend for eight

consecutive months ending July 2015. The global
demand conditions remain subdued and the recent
devaluation by China has raised further concerns.
Some improvement in exports can be expected in
second part of the current fiscal year. Based on the
responses of the participating economists, the
median growth forecast for exports has been put at
2.4% for fiscal year 2015-16.

Current Account Deficit as % of GDP

FY16

USD/INR Exchange Rate

FY16

1.2

Q2 FY16

Q2 FY16

1.3

Q1 FY16
1.1

64.3

Q1 FY16

1.1
1.0

63.8

1.2

1.3

1.4

62.5

63.3
63.0

63.5

64.0

64.5

Economic Outlook Survey

September 2015

Survey Results: Part B

Views of the Economists
PROGNOSIS ABOUT THE GLOBAL SITUATION AND LIKELY IMPACT ON INDIA
Global economic recovery has remained fragile so far this year with signs of uncertainty persisting and
hampering a sustained turn around. At the start of the year, the United States economy witnessed a
discernible moderation owing to harsh weather conditions. This was reflected in the contraction in GDP
growth in the first quarter numbers. Nonetheless, prospects thereafter have noted an improvement with a
strong rebound noted in consumer spending. On the European side, subdued demand and risk of deflation
continue to pose as challenges. Further, Greeces default on its debt payments in June this year posed a
serious threat to global economic stability.
The economists participating in the survey felt that prospects of advanced economies remain muted and with
China slowing down, the emerging market group would register further moderation. The sudden devaluation
of Yuan by China has taken the world by surprise and has caused volatility in the financial markets. This
reflects a more entrenched weakness in China than what was being anticipated.
The economists felt that the direction of the global recovery course would become a little more certain by end
of this year. The United States is expected to take a stance with regard to its monetary policy later in the year
and the uncertainty surrounding Greece will also be cleared. Euro zone has recently allowed for an 86 billion
euro bailout for Greece but this requires affirmation from all Euro zone members. Also, Greece would be
undertaking bailout reforms which include tax, pension and administrative reforms.
About the expected impact on Indias economy, the participating economists were of the view that the
country is likely to remain on the recovery course and much would be contingent on Government continuing
the reform process and the progress achieved on implementation.
However, some spill over from the global developments will be inevitable. The exports have been witnessing
a contraction and this can have a moderating impact on the industrial sector as well. Thus, keeping the
domestic demand intact will be important. Also, foreign institutional investors have been in the selling mode
owing to the recent global developments. India would have to remain cautious given the volatility in foreign
exchange markets, the probable stance of US Federal Reserve on interest rates and continued monetary
easing in other parts of the world.
The economists were of the view that resolving domestic issues and undertaking pending reforms would be
critical. It was also suggested that the emerging markets should explore and leverage greater opportunities
through trade and investments.
KIND OF ENVIRONMENT BANKS REQUIRE IN ORDER TO BRING DOWN THE LENDING RATES
The Reserve Bank of India has cut the repo rate by 75 bps between January and June this year. The
corresponding decline in the lending rates by Banks has been to the tune of 25-30 bps. The transmission by
Banks has been gradual given the underlying environment of uncertainty. According to the economists
participating in the survey, an improved transmission will be contingent upon a pickup in stalled projects and
a sustained recovery in the economy.
Besides, the banks have been under significant stress owing to the rising non-performing assets. The
economists participating in the survey also indicated that the cost of raising funds for banks has been high
and that the banks have been under pressure to maintain their net interest margin.

Economic Outlook Survey

September 2015

Amidst the above scenario, the recently announced seven point strategy by the government to transform
Public Sector Banks was much required. De-stressing the Public Sector Banks remains a key focus area both
for the Government and the Reserve Bank of India. Also, the new accountability framework of Key
Performance Indicators and the process of Governance reforms initiated will be instrumental in turning
around the present situation.
Evident signs of moderation emanating from China have caused jitters in the global economy. Under this
situation reviving the momentum in domestic manufacturing activity, though challenging, will remain critical.
This will also enable creating an appetite for new loans.
ENHANCING INVESTMENT PROSPECTS IN STATES
States are the building block of the nation and their role in achieving Indias growth aspirations is
indispensable. The participating economists were of the opinion that the first and foremost thing for
enhancing investment prospects of States is to resolve policy log jams on certain imperative issues such as
land acquisition, goods and services tax etc.
States should accelerate the process of infrastructure development as the sector has huge forward and
backward linkages. Public Private Partnerships should be encouraged and the States should build a conducive
environment for facilitating the same.
Given the huge diversity, each of the States has its own comparative advantage; the same should be identified
as the States Unique Selling Point (USP) which should be made a part of its core development strategy.
Further, sectors with high growth and high employment potential like medium and small industries, tourism
should also be focused on.
The participants taking part in the survey were of the view that education and health are the basic
foundations and that all States should strive to have a skilled and healthy workforce.

Economic Outlook Survey

September 2015

Appendix

Key Macroeconomic variables

Mean

Outlook
2015-16
Median
Min

Outlook
Q1 2015-16

Outlook
Q2 2015-16

Max

Mean

Median

Min

Max

Mean

Median

Min

Max

GDP growth rate at market

prices (%)

7.6

7.6

7.5

7.7

7.2

7.2

6.9

7.4

7.3

7.3

7.2

7.5

GVA growth
prices(%)

7.7

7.7

7.5

7.9

7.1

7.1

7.1

7.2

7.4

7.3

7.2

7.8

Agriculture & Allied

2.2

2.1

0.8

3.5

1.0

1.0

0.6

1.2

1.3

1.1

0.9

2.0

Industry

6.5

6.5

6.1

6.9

6.0

6.0

5.8

6.3

6.2

6.1

5.8

6.7

Services

10.2

9.8

9.2

11.6

9.5

9.4

9.0

10.3

9.6

9.7

8.5

10.6

Gross Domestic Savings (% of

GDP at market prices)

32.0

32.0

30.0

34.0

30.3

30.0

29.0

32.0

31.0

30.0

30.0

33.0

Gross Fixed Capital Formation

(% of GDP at market prices)

28.8

28.5

28.1

30.0

27.8

28.0

27.0

28.5

28.2

28.2

27.3

29.0

Fiscal Deficit (as % to GDP)

Centre

3.8

3.9

3.5

4.0

3.3

3.2

3.0

3.5

3.5

3.5

3.4

3.6

Growth in IIP (%)

4.8

5.0

3.2

6.0

3.5

3.4

2.6

4.5

4.6

4.5

2.8

6.7

WPI Inflation rate (%)

0.5

0.7

-1.0

1.3

-1.4

-2.4

-2.4

1.5

-2.5

-2.5

-2.9

-2.1

CPI combined new inflation

rate (%)

5.3

5.1

4.8

6.0

5.2

5.2

4.9

5.4

4.9

5.2

3.7

5.5

Money supply growth M3 (%)

(end period)

12.3

12.0

11.0

14.0

11.7

11.0

11.0

13.2

11.6

11.5

11.5

11.9

rate

at

basic

Economic Outlook Survey

September 2015

Bank credit growth (%)

11.8

11.5

10.0

14.0

10.3

9.0

9.0

13.0

9.6

9.5

9.5

9.8

Repo Rate (end period)

7.0

7.0

7.0

7.25

7.25

7.25

7.00

7.25

318.8

324.3

300.0

332.0

66.9

66.9

66.5

67.0

69.7

69.7

68.3

71.0

-0.7

2.4

-8.0

3.5

461.7

478.0

428.0

479.0

99.0

98.9

98.5

99.0

104.7

104.7

101.0

108.4

Growth (%)

0.5

2.3

-4.5

3.7

Trade Deficit (% to GDP)

6.1

6.5

6.9

5.0

as % of GDP at current price

1.2

1.2

1.4

1.0

1.1

1.1

1.1

1.0

1.3

1.3

1.3

1.2

US$ / INR exchange rate (end

period)

63.8

63.8

62.8

65.0

63.3

63.3

62.5

64.0

64.3

64.3

62.5

66.0

Merchandise Export
Value in USD billion
Growth (%)
Merchandise Import
Value in USD billion

CAD