Mumbai: Quality of the country's growth is improving with focus shifting from populism or on boosting cyclical growth through fiscal and monetary stimuli to "repairing the system and initiating structural reforms", rating agency Crisil has said.
“The biggest positive is that policy focus hasn’t been based on populism, or on boosting cyclical growth through fiscal and monetary stimuli, but rather on improving the ‘trend’ growth by repairing the system and initiating structural reforms wherever possible,” it said in a report which was released on Monday.
Giving a thumbs up to the policies of BJP-led NDA government, it said, “The Modi government’s fiscal policy, encouraged by low crude oil prices, has been quite prudent, and has aimed to improve the quality of spending through better targeting, and scaling up of infrastructure investment, while keeping a tab on overall deficit. The monetary policy, too, has focused on ushering in a low and stable inflation regime.”
The report also noted that unlike China, the current growth in India is not supported by rampant credit creation.
"Credit growth has averaged 9.8 per cent in the last two years, almost in lockstep with 10.2 per cent nominal GDP growth, underscoring sustainability," it said.
According to Crisil, structurally positive steps have been taken such as mending the electricity and banking sectors, but these remain "work in progress".
“The government has also managed to pass two key Bills – the Insolvency and Bankruptcy Code Bill, 2016, which strives to create an enabling environment for expeditious resolution of bankruptcies with least pain to stakeholders,” the report said.
"The focus on quality of growth with reform initiatives means there will not be significant upsides immediately," Crisil Chief Economist Dharmakirti Joshi said.
"But if relentlessly implemented, they will do more to raise the trend growth rather than cyclical growth that we are seeing now. We believe this will remain a work in progress for some more time and the momentum needs to continue," he said.
However, Joshi added that the government needs to create 6,00,000 jobs a month but is falling short of target.
"Food processing and textiles are two sectors where maximum job creation is possible," he said.
Crisil has estimated the GDP to grow at 7.9 per cent in the current fiscal, provided the monsoon is normal and the global situation does not deteriorate.
Last month, the government had announced a Rs 6,000-crore package for the textile sector, which envisages billions of dollars investment over the next four years leading to an intended generation of new jobs to the tune of 10 million.
