Economy to grow at 7.1 and not 7.4 as projected by ADB, WB, IMF: India Ratings

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An Indian bank employee checks stacks of new 2000 rupee notes in Ahmedabad on November 11, 2016. Long queues formed outside banks in India as people crowded in to deposit old currency and withdraw new notes after the two largest denomination rupee notes were taken out of circulation. / AFP / SAM PANTHAKY (Photo credit should read SAM PANTHAKY/AFP/Getty Images)

(Online Desk)

The Indian economy is yet to recover from the shocks of demonetisation and goods and services tax (GST), according to India Ratings & Research (Ind-Ra), a subsidiary of Fitch Ratings.
“There is a notion that the Indian economy will soon rebound and grow at a much faster rate than that witnessed in FY17 and FY18. However, Ind-Ra believes the pickup in growth will be gradual and India’s gross domestic product will expand 7.1 per cent in FY19,” it said in its report.

The projection is lower than 7.4 per cent growth estimated by Asian Development Bank and International Monetary Fund.“While the implementation of GST is likely to benefit the economy over the medium to long-term, the same cannot be said about the impact of demonetisation,” the agency said.

It said fiscal deficit in 2017-18 may come in at 3.5 per cent, overshooting the budgeted estimate of 3.2 per cent. The agency projected fiscal deficit in 2018-19 to be at 3.2 per cent, higher than three per cent stated in the medium-term fiscal policy statement. The agency has also said that private investment will be muted.

“Ind-Ra’s study of top 200 listed and unlisted non-financial asset-heavy corporates suggests that private-sector capex revival is likely to remain muted till FY20,” it said. It also said that the Indian rupee will be range-bound at average Rs 66.06/$ in 2018-19.The agency expects wholesale and retail inflation to come in at 4.4 per cent and 4.6 per cent, respectively, in FY19.

“With rising inflation and inflationary expectation of households, Ind-Ra believes the rate cut cycle to have nearly come to an end.The report also projected that the Budget will not be a populist one.“Despite 2018-19 being a pre-election year, Ind-Ra does not expect the Union Budget to be populist,” it said. It, however, expects some expenditure reallocation with an increased focus on the rural and agriculture sectors.

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