GDP to be a tad higher to 7.5% in FY20: India Ratings

21-January-2019

India Ratings, a Fitch Group Company, on Thursday estimated India’s GDP growth could touch 7.5 per cent in financial year 2019-20 as against 7.2 per cent during current fiscal i.e. 2018-19.

The agency said that current fiscal has seen sharp recovery after demonetization and GST (Goods and Services Tax) which is on the expected line. However, the agency felt that GDP growth would have been even better but for the global headwinds caused by an abrupt rise in crude oil prices and strengthening of USD . Also developments such as frequent revisions in GST rates, continued agrarian distress, slow progress on Insolvency and Bankruptcy Code cases, and liquidity crunch faced by non-banking finance companies post IL&FS saga affected sharp recovery. However, the agency estimates , GDP growth in FY20 will be more dispersed and evenly balanced across sectors as well as demand-side growth drivers.

Over the past few years, private final consumption expenditure and government final consumption expenditure have been the primary growth drivers of Indian economic growth. India Ratings believes investments are slowly but steady gaining traction with gross fixed capital formation growing 12.2 per cent in FY19 and projected to clock 10.3 per cent in FY20. This is certainly a comforting development, but the flip side of this development is that it is primarily driven by the government capex, as incremental private corporate capex has yet to revive.

The agency’s study of top 200 listed and unlisted non-financial asset-heavy corporates suggests that private sector capex is unlikely to revive before FY21. It believes that due to the slowdown in private corporate and household capex, the GDP growth has failed to accelerate and sustain itself close to or in excess of 8 per cent.

Source: THE HINDU BUSINESSLINE