“Private final consumption expenditure (PFCE) grew 7.5% in 2015-16. We had expected PFCE growth to accelerate to 7.8% in 2016-17 and then to over 8% going forward. Now, we have scaled back the PFCE growth estimate to 5.5% for 2016-17 and to 6.8 % per annum going forward.”
Mr. Vyas further speculated that this downward trend in consumption expenditure will delay any immediate revival in private sector investment.
“We expect capital formation to shrink by nearly 2% in 2016-17 as against an earlier expectation of a 2.3% increase in the same,” Mr. Vyas wrote. “We had expected investments to pick up pace each year thereafter to reach 10 % growth only in 2020-21. Gross fixed capital formation was expected to remain around 29 % and reach 30 % of GDP only in 2020-21. Now, we believe that the investments-to-GDP ratio would be only around 27-28 %.”
