ECONOMIC REPORT OF THE PRESIDENT

adjusting to changing dynamics in the world economy have led to excess
capacity in some industries where China is a dominant player. Adjusting to
these factors poses additional challenges for policymakers.
Economic growth in India continues at a solid pace of a projected 7.4
percent over the 4 quarters of 2016 (IMF 2016b). Private consumption has
been a major driver in economic growth, contributing 4.3 percentage points
to its 7.3 percent real GDP growth rate in the four quarters through 2016:Q3.
Lower inflation and fiscal consolidation over the past year has created
additional policy space for India to stimulate growth should a crisis occur.
Macroeconomic risks revolve around inflationary pressure stemming from
increasing commodity prices, which could weigh on the current account and
fiscal deficit (OECD 2016). Inefficiencies remain in the public sector, with
India’s poor still lacking health care coverage, educational attainment, and
access to financial services (IMF 2016a). Further, inequality in India remains
high.
The Outlook
GDP Growth over the Next Three Years
After growing roughly 2.6 percent on average during the four quarters
of 2013 and 2014, real GDP growth averaged 1.9 percent during the four
quarters of 2015 and 1.8 percent at an annual rate during the first three quarters
of 2016. The Administration forecast (finalized on November 9, 2016)
projects an acceleration to 2.4-percent growth during the four quarters of
2017. The Administration forecast is the same as the CBO’s August 2016
forecast and slightly above the Blue-Chip November consensus forecast of
2.2 percent. All forecasts implicitly or explicitly make assumptions about the
future course of economic policy. The Administration’s forecast is based on
a baseline that assumes enactment of the President’s policies, most of which
were spelled out in the budget released in February 2016. In contrast, the
CBO forecast assumes that current laws are unchanged while the Blue Chip
implicitly reflects the expectations that private forecasters have about what
policies will actually be enacted in the future.
The Administration’s forecast expects that forces that influence
investment and government spending point to faster growth in 2017 than
in the recent past, while consumer spending will moderate somewhat and
international forces will likely be a drag on growth. With a strengthening
State and local sector, State and local fiscal actions will likely be somewhat
expansionary in 2017.
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