GST will benefit India's consumption growth: Crisil

Ratings firm Crisil on Monday predicted a strong boost to India's domestic consumption in 2016-17 led by implementation of 7th pay panel's recommendations, with reforms like the Goods and Services Tax (GST) to benefit the uptick.

"Consumption growth will be buoyant in 2016-17. One Rank One Pension (OROP) and 7th Pay Commission will give a boost to domestic consumption this year and reforms like GST will further benefit India's consumption story," Pawan Agrawal, Chief Analytical Officer, Crisil said.

"So far this year we have seen India's story led by strong domestic consumption in auto-ancillaries, packaging and pharmaceutical sectors. What is noticeable is that we expect the rural demand to pick up in the second half of the current fiscal," Agrawal told reporters during a teleconference.

 

From industry perspective, consumption related companies are expected to grow. The growth will now be supplemented by rural India, he said.

For the remaining half of the financial year, he said the credit profile will further improve because of a healthy demand, improvement in liquidity profile and stabilisation of metal prices.

Also, the pace of implementation of reforms is a key factor in medium to long term that the rating agency will be monitoring, he said.

Crisil emphasised that sustainability will continue to be critical as there were hurdles like investment in infrastructure, slow transmission of Reserve Bank of India rate cuts from banks to customers that needed to be looked into.

"Weak demand still persisted in the real estate and construction sector. Banking sector too still seem to be bogged down by bad loans and for this fiscal, the level of non-performing assets will remain at elevated level," Agrawal said.

"Road sector is doing better, but it will take time for it to become visible. The global environment also remains uncertain," he said.