What They Said: Are India’s Economic Predictions Realistic

Agence France-Presse â€" Getty Images Villagers protesting against turning their farmland into an industrial development area for a Posco steel plant in Jagatsinghpur district in Orissa, in this June 18, 2011 photo.

The Economic Survey for the fiscal year 2012-2013, released on Wednesday, said that the Indian economy is likely to grow between 6.1 percent and 6.7 percent in the fiscal year that begins April 1, up from 5 percent in 2012-2013.

However, analysts immediately raised questions about those pedictions. Here’s why:

Sujan Hajra, chief economist and executive director, Anand Rathi Financial Services, Mumbai:

In my opinion, this number - between 6.1 percent and 6.7 percent - is very, very unlikely. To achieve this target you will need at least ten percent growth in investment in the country. Whatever indicators you look at â€" capital goods production, capital goods import, projects launched, new project approval- none of this data indicates any recovery in these segments.

Foreign flows have never funded more than 10 percent of overall investment in the country. That leaves 90 percent to domestic sources. We currently have a serious domestic funding problem and huge build up of external debt, which I think are the major headwinds for invesment recovery.

Ajay Bodke, head of investment strategy and advisory at Prabhudas Lilladher, a Mumbai brokerage:

Let me remind you that last year the economic survey spoke about 7.! 6 percent projected growth - and what we had was 5 percent growth. The variation between the economic survey’s projections and the reality was 2.6 percent - that is not just a miss, but a humongous miss.

These growth numbers are still in the realm of possibility, but the government will have to work hard to continue to roll out the reforms juggernaut. Going by the measures introduced since September 2012, the government is hoping for investment led demand.

The next step to be taken is the simplification of the plethora of permissions that have led to the entanglement of projects worth millions and billions of rupees. There are various infrastructure projects stuck at various stages of approvals such as the Tata Steel plant in Orissa or the POSCO plant in Orissa. These projects are of the scale that they have the capacity to propel national growth and change the economic dynamics of the region, and they are stuck in a quagmire of bureaucratic red tape.