The Indian economy is slated to grow at up to 7.5% in FY19, while in the current fiscal the growth is expected to be 6.5%, according to a latest CRISIL report. Interestingly, the economic survey had forecasted FY19 growth at 7-7.5%. A report by United Nations in February had predicted that India’s economy is likely to expand by 7.2 per cent in 2018 and go up further to 7.4 per cent in the following year, backed by strong private consumption, public investment and the ongoing structural reforms. CRISIL’s estimates seems to be in line with UN and the World Bank’s India growth forecast. CRISIL noted that after two year of below par-growth, impacted by demonetisation and GST, growth is seen recuperating to a respectable 7.5 per cent in the next fiscal year. We take a look at three key reasons why CRISIL is upbeat on india’s growth prospects.
Resolution of stressed assets
In its report, CRISIL says that with gross non-performing assets at 10.5 per cent, no meaningful and sustainable economic recovery is plausible without beginning of a resolution process. The firm notes that ‘transparent and time-bound process’ put in place by the by National Company Law Tribunal (NCLT) offers hope. According to CRISIL, while haircuts are likely to be deep, the scale and timeframe of recovery marks a watershed moment for India’s economy. Further, fresh slippages will moderate and NPAs will likely peak at 11 per cent by March 2019, due to improving economy and turning credit cycle.
Reforms- RERA and GST
CRISIL said the low base due to structural reforms such as GST and demonetisation is likely to help is posting better figures for the upcoming quarters, even as the effects of these reforms begin to fade. Further, the rating agency says that sustainable recovery can be achieved from the effective implementation of key reforms such as the Real Estate (Regulation and Development) Act of 2016, and the Uday rolled out in the last few years. CRISIL observes that each of these reforms has the potential to be transformative in the long run, “but near-term efficacy and impact, in our view, is mixed at best.”
The agency observed that the global growth momentum is likely to sustain going forward, propelling, providing tailwinds to domestic growth. The IMF had reiterated that the global economy is expected to grow 3.9% this year, faster than 3.7% forecast earlier in October. According to the global body, 120 economies, accounting for three quarters of world GDP, have seen a pickup in growth in year-on-year terms in 2017, the broadest synchronised global growth upsurge since 2010.