After IMF, CRISIL cuts India’s growth estimates to below 7%
The downward revisions to GDP growth in CRISIL Ltd’s flagship annual report come amid several steps announced in the annual budget presented by finance minister Nirmala Sitharaman to attempt to shore up the slowing economy and increase its overall size to US$5 trillion in five years.Updated: Aug 01, 2019, 13:57 IST
After the International Monetary Fund’s lowering of India’s growth forecast for 2019-20 last month, the ratings firm CRISIL Ltd on Thursday cut the country’s gross domestic product (GDP) growth estimates for the current financial year to 6.9%, signalling that it did not expect the current slowdown to ease.
The downward revisions to GDP growth in CRISIL Ltd’s flagship annual report come amid several steps announced in the annual budget presented by finance minister Nirmala Sitharaman to attempt to shore up the slowing economy and increase its overall size to US$5 trillion in five years.
The latest estimates show the economy still faces several bumps, especially a weaker monsoon, slowing of high-frequency economic data, such as automobile sales, and impacts of slower global growth. High-frequency data, especially sales data, are those that change frequently.
CRISIL’s lowering of growth from 7.1% amounts to a cut of 20 basis point. A basis point is one hundredth of a percentage point.
During the January-March quarter, the latest period for which official data is available, the country grew at its slowest pace in five years at 5.8% due to slowing growth in agriculture and manufacturing.
A country’s GDP represents the value of all goods and services produced in a given period and economists take it to be the broadest measure of income growth and output.
In April, the Reserve Bank of India had lowered its GDP growth outlook for 2019-20. It expected GDP growth of 7.2% for 2019-20, lower than the 7.4% estimate it had put out in February.
“There are some signs of domestic investment activity weakening as reflected in a slowdown in production and imports of capital goods. The moderation of growth in the global economy might impact India’s exports,” the RBI had said.
“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 annum. Policy action looks more attuned to consumption than investment demand, which means consumption will be the first to ascend as the tide turns,” Ashu Suyash, CRISIL Ltd’s CEO, said on Thursday.
Lowering of growth projections will steepen the challenges for the Modi government, from adding more jobs to pumping more investments into various sectors needed for growth.
On July 23, the IMF had pared its growth projections for India. The fund said the country’s economic expansion was now expected at 7% in the year ending 31 March 2020, some 0.3 percentage points lower than projections made in April 2019. The organisation said weaker domestic demand would limit India’s economic recovery. This means people are buying or spending less on various goods, from consumer items to real estate.
India’s GDP had expanded robustly at 8.2% in fiscal 2017, the fastest clip in a decade. Analysts say a slowdown took hold due to India’s pile of bad loans, implementation of a Goods and Services Tax, falling exports and worsening of farm incomes.