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From an average 5.2% of GDP between FY10 and FY14, the fiscal deficit came to 3.8% between FY14 and FY18, helped by lower crude oil prices. Retail inflation sharply declined to an average of 4.7% between FY15 and FY18 from 10.2% in the preceding five years.

The Modi government’s efforts to ensure a well-oiled economy could be tested in its fifth year, as rupee volatility and exogenous factors such as a runaway rise in global crude oil prices could weigh on the economy, according to a Crisil report.

The four years of the Modi government witnessed steady macroeconomic parameters – from GDP and inflation to fiscal deficit – with policymakers having generally avoided quick fixes to spur growth, and instead focused on steps that will bear result only in the medium or long term, said
the report.

However, challenges in job creation, rural distress, tepid investment climate, muted credit growth and subdued exports have posed risks to the economy. Also, a recent spurt in oil prices has emerged as a major challenge for fiscal prudence in the build up to the general elections in 2019.

Among the positives, India’s real gross domestic product (GDP) growth averaged 7.3% between FY15 and FY18, the fastest among BRICS economies and only a tad lower than 7.5% in the previous five years, despite demonetisation and the GST, said the Crisil report.

From an average 5.2% of GDP between FY10 and FY14, the fiscal deficit came to 3.8% between FY14 and FY18, helped by lower crude oil prices. Retail inflation sharply declined to an average of 4.7% between FY15 and FY18 from 10.2% in the preceding five years.

The current account deficit (CAD) has almost halved to 1.2% in the past four years, compared with the average of the previous five years.

Foreign exchange reserves have risen substantially in the past four years to touch $421 billion by the end of FY18. Net FDI inflows rose from $22 billion in FY14 to $36 billion in FY17. As foreign capital inflows became sufficient to finance the CAD, the rate of the rupee depreciation against the dollar reduced to an annual average of 1.7% in the past four years, against a 5.8% depreciation in the preceding five years.

However, challenges remained. The farm sector growth slowed down to 2.4% between FY15 and FY18, from 4.3% between FY10 and FY14. Agricultural exports fell by an average 3.1% between FY15 and FY18, against a 19.5% growth between FY10 and FY14.

While the fiscal deficit for the central government moved down in recent years, the average fiscal deficit for states increased to 3.2% between fiscal FY15 and FY17 (against 2.2% during the previous five years).

The investment rate or share of gross fixed capital formation in the GDP came down from an average 33.6% between FY10 and FY14 to 31% between FY15 and FY18.

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