Management Discussion & Analysis

FY 2016-17  



Overview of World Economy:

In 2016 the global economy witnessed slow pace of growth and uncertainties with developed countries adopting protectionist policies. The current year is showing signs of revival of investment climate as the capital markets gain buoyancy, signs of recovery in manufacturing and trade, likely upside in the economic activity in Japan driven by healthy net exports and European countries witnessing traction in domestic demand paving way for growth. Advanced economies are expected to make small step-ups while growth in emerging economies continue to drive the global growth projections. China is expected to showcase favourable growth with strong policy support. Oil prices have shown traction in the recent months and are expected to be range bound thus bringing down the level of budget deficits in Middle East, allowing the Governments to have additional fiscal space to increase investments.

However protectionist policies by the US and geopolitical risks persist that may pose impediment in the global economic recovery. The advanced economies are facing persistent structural problems such as low productivity growth and high income inequality. Against this backdrop, economic policies have an important role to play in staving off downside risks and securing the recovery.


Overview of Indian Economy:

Amidst the global backdrop, Indian economy stood steadfast on its growth trajectory. In the framework of robust macro-economic stability, the year 2016-17 was marked by a few but robust policy developments such as passage of bankruptcy code, constitutional amendments paving way for GST and demonetization of notes in the pursuit of enhancing formalization of various segments of the economy. The GDP growth for the year 2016-17 at 7.1% was lower as compared to the previous year on account of weak investment sentiments even though Government enhanced spending and exports rose over the last few months of the year. Demonetization had a temporary adverse impact, as labour- intensive construction sector contracted. Growth in gross fixed capital formation slowed sharply in FY17 to 27.1% from 29.3% a year ago.

In the fiscal year 2017-18 India is expected to grow to around 7.2% provided macroeconomic parameters are favourable. There is an uptick in India’s exports based on global economic activity. Consumption is also expected to witness traction as the economy catches up after demonetization