Economic recovery depends on governments initiative, says D&B

New Delhi, Oct 23: Post-demonetisation and implementation of the Goods and Services Tax (GST), the current economic slowdown has "bottomed out" and the recovery of the economy would "critically depend on the initiatives" the government takes from now onwards, according to a report released on Monday.

The report also said the quantum of the impact of the structural reforms - demonetization and GST - was expected but the quantum was not estimated and hence the current slowdown in the economy is painful.

"We believe that the slowdown has bottomed out, however, the stage and pace of recovery would critically depend on the initiatives that the government takes from now onwards to boost the growth momentum, especially the private sector investment, without which we will not be able to aim for an ambitious growth rate," said Arun Singh, Lead Economist Dun & Bradstreet (D&B) India.

According to D&B Economy Observer, the rebound in industrial production, especially in capital goods is not just driven by festive-led demand and is on a sustainable basis.

"...as both the formal and informal segment of both the industrial and the services sector adjust themselves to the overall GST system and the frequent changes suggested under GST Councils, GVA (Gross value added) will grow only by 6.2 per cent in Q2 (second quarter) FY18, slightly higher than 5.6 per cent in Q1 (first quarter) FY18," the report said.

It also said the recovery in exports, moderate interest rate, lower inflation rate, controlled trade deficit, sizable FDI inflows and the government's commitment towards fiscal discipline are likely to pave the way for the economy to recover from the current scenario on a strong note.

"It is also expected that the continued reforms aimed at the formalization and increase in accountability in the economy will help in preventing leakages and flow of resources in the desired direction and provide a strong foundation for a robust and sustainable growth process," Singh said.

According to the report, Index of Industrial Production (IIP) is expected to grow by 4.-4.2 percent during September 2017.

The CPI inflation would be in the range of 3.3-3.5 per cent and WPI inflation to be in the range of 2.7 - 2.9 per cent during October 2017, respectively.