“The economy has definitely turned around and CII strongly expects GDP growth to pick up to over 8 per cent during the current financial year,” stated Dr Naushad Forbes, President, Confederation of Indian Industry. CII's GDP projection for the year was 7.75-8.25% in April 2016, and Dr Forbes expects the year to close at the upward end of the band.

GDP growth for 2015-16 was estimated at 7.6% as compared to 7.2% for 2014-15. The last quarter growth rate of 7.9% is the highest for the year. Dr Forbes added, “We believe that recovery is now well-entrenched and can be expected to pick up pace with better monsoons, rural demand, and ongoing fast-paced reforms process.”

Signs of a recovery are evident in the improved performance of many more sectors than earlier as borne out by the marked pick-up in core sector growth. Consumer spending has remained strong, reflected, for example, in the rising sales of two-wheelers (over 21% in April 2016) and the growth of domestic air passenger traffic (over 22% in 2015-16).

Although the growth rate of gross fixed capital formation, a proxy for investment, has lagged at 3.9%, CII believes that the first quarter of the current year would show faster growth due to additional capex spending by Government on infrastructure projects. This would ‘crowd in’ private investments as well, especially as the interest rates have come down, felt Dr Forbes. 

There has been steady pick-up in the value of announced projects by both the government and the private sector. The share of completed projects as a proportion of projects under implementation has also improved in the quarter ending March 2016, the CII release said.

The CII Associations’ Council (ASCON) survey results for the quarter January - March FY16 reveal an improvement in production growth over the corresponding quarter a year ago. The current trends also point towards a bottoming out of growth in the majority of sectors.

As per the survey, more sectors have moved from low growth to moderate and high growth categories. Capacity utilization too has picked up, indicating demand acceleration. This reflects the increased growth in private consumption to 7.4% in the official data. 

The Government has adhered to the fiscal deficit target of 3.9% and has announced several new policies which add to the comfort of investors including Insolvency and Bankruptcy Code, National Capital Goods Policy and Intellectual Property Rights policy. The CII President stated that such policy announcements would infuse new investments into the economy.