CRISIL cuts India's GDP growth in FY20 to 6.9 pc

Global analytical firm CRISIL on Thursday sliced its estimate of India's gross domestic product (GDP) growth by 20 basis points to 6.9 per cent for the current fiscal 2019-20 following a triangulation of downside risks

While the slowdown will be significant in the first half of this fiscal, the second half is expected to find support from expected monetary easing, consumption, and statistical low-base effect, said CRISIL in its latest report titled 'Uphill Trek.'

Agricultural terms of trade are also expected to improve with a pick-up in food inflation, it said, adding that farmers will benefit from income transfer of Rs 6,000 per year and farm loan waivers in some states.

 

"Given the crosswinds, the sops announced so far might not be enough to pitchfork growth in this fiscal to, or above, the past 14-year average of 7 per cent per annum. Policy action looks more attuned to consumption than investment demand, which means consumption will be the first to ascend as the tide turns," said CRISIL's Managing Director and CEO Ashu Suyash.

India's impressive growth, which was 8.2 per cent in fiscal 2017 (the fastest in a decade), was affected by disruptions stemming from policy initiatives and reforms, and rising global uncertainty including from trade disputes.

According to CRISIL, corporate revenue growth will slip back to single-digit after two fiscals, at a rate of 8 per cent, reversing the trend of double-digit growth in the past two fiscals.

"Sales volume in the automobiles sector will be impacted by a trifecta -- of spurt in costs due to changes in regulation, tightening liquidity, and moderating income growth. Sombre farm incomes will also weigh on rural-led segments such as FMCG," said Senior Director at CRISIL Research Prasad Koparkar.

On the banking sector, it said the non-performing assets are expected to decline to 8 per cent by this fiscal end from the peak of 11.5 per cent in FY18 on the back of lower accretion and increased recoveries.

CRISIL added that growth for non-banking finance companies NBFCs, particularly in the retail segment, will likely pick up gradually as they have "used this opportunity to correct their asset-liability mismatches and have reduced reliance on short-term market borrowings, which is a positive for the sector."

"The crucial question therefore is whether a trough is in sight," said Chief Economist at Crisil Dharmakirti Joshi.

"Given the fiscal constraints, public spending is unlikely to have the heft to pull growth above 7 per cent. Some of the recent and much-needed reforms will pay off only over the medium term. There will therefore be some near-term onus on monetary policy to stimulate. But how effective that can be is the big question," he said in a statement.

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