The Indian economy ended the last fiscal on a high with growth for the full year touching 7.6% amidst a struggling global economy and a worsening investment climate. In the current fiscal, the domestic economy has continued to show resilience even in the wake of deteriorating global conditions and increased protectionist measures. The ongoing fiscal can be seen as the year where a number of game changing initiatives were agreed upon such as the passage of the constitutional amendment bill for GST and Bankruptcy code bill. 

Notwithstanding demonetization, the economy stands at the cusp of noteworthy changes with a move towards GST and an unified tax regime along with a thrust on greater cash accountability and digitization across payment channels. As is the case with any big change, it comes with short term adjustment costs for longer term gains. However, these gains are not a given and can only be realized if there is continuous push towards achieving stated goals.

The narrative across the world is also changing fast with uncertainty rising on the back of protectionist rhetoric gaining ground. Most multilateral agencies expect global growth to recover in the current year, which should help the Indian economy. But, it is unlikely to be a smooth ride with major events waiting to unfold. Negotiations between Britain and the EU on BREXIT, fiscal and monetary policy shifts within the US, evolving political scenario in the Eurozone and China managing its growth slowdown are just some of the many unknowns that policymakers and market participants have to contend with.

As we move ahead, there are new challenges as some of the gains enjoyed last year may not be there in the next year. Inflation can be one such challenge as oil and broader commodity prices have started to move up in a meaningful way after a gap of more than two years. Domestic agricultural growth assumes a greater significance in such a scenario, as policy makers will need to keep a vigilant eye on any spike in prices. A major overhaul of the taxation regime with introduction of the Goods and Services Tax (GST) and the General Anti-Avoidance Rule (GAAR) could also mean some disruption over the near term. That said, there are positives that brighten the outlook such as financial inclusion, focus on affordable housing and infrastructure and stable macro indicators that demonstrate the strength of the economy. Safe to say that a new path will have new challenges and India seems adequately equipped to face such a situation confidently.

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