Indian economy to grow at 7.2 per cent in 2018-19, says India Ratings and Research report

Indian economy is projected to grow at 7.2 per cent in 2018-19, India Ratings and Research (Ind-Ra) said. The rating agency earlier forecasted India’s economic growth at 7.4 per in current fiscal. The key reason for this, Ind-Ra said, is the upward revision in the estimation of inflation for 2018-19 due to increasing crude oil prices and the government’s decision to fix the minimum support prices of all kharif crops at 1.5 times the production cost (A2+FL). The rating agency in a report titled ‘Mid-year FY19 Outlook’ said it believes the other headwinds lurking on the horizon are rising trade protectionism, depreciating rupee and, no visible signs of the abatement of the non-performing assets of the banking sector.

“Furthermore, it is taking a tad longer than expected to resolve cases under the Insolvency and Bankruptcy Code. “This simply means ‘bringing the stuck capital back into the production process to enhance the productivity of capital’ will be a long drawn-out affair,” Ind-Ra said. Ind-Ra said it expects private final consumption expenditure to grow 7.6 per cent in 2018-19 compared to 6.6 per cent in 2017-18.

The rating agency pointed out that government capex alone will be insufficient to revive the capex cycle, as its share in the total capex of the economy was only 11.1 per cent during 2012-17. “On the other hand, the share of private corporations was 40.9 per cent. As private corporations in combination with the household sector command 77.5 per cent of the total investment in the economy, their capex revival is a must for a broad-based recovery in the investment cycle,” it observed.

Noting that India will face continued headwinds on the exports front, the rating agency said although it expects the annual value of exports to touch USD 345 billion in the current fiscal, crossing the peak of USD 318 billion attained in 2013-14. Ind-Ra said it expects average retail and wholesale inflation in 2018-19 to come in at 4.6 per cent and 4.1 per cent, respectively, as against 4.3 per cent and 3.4 per cent forecasted earlier. “Ind-Ra expects CAD to widen to USD 71.1 billion in 2018-19 from USD 48.7 billion in 2017-18,” it said.

On rupee, the rating agnecy said that in 2018, rupee has already depreciated 7.7 per cent till July in response to elevated global turbulence, worsening of current account, rising inflation and concerns related to fiscal deficit. Ind-Ra said it has maintained a stable outlook on the finances of Indian states for 2018-19. “Ind-Ra expects the aggregate fiscal deficit of the states to moderate to 2.8 per cent of GDP,” Ind-Ra said.

Source: PTI