CARE cuts India’s GDP growth to 6.4-6.5% for FY20; cites these concerns

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Published: September 5, 2019 6:14 PM

CARE Ratings on Thursday revised India’s GDP growth forecast on account of subdued growth in the industrial sector and weakness in the agricultural sector during Q1FY20.

GDP growth, Reserve Bank of India, CEII, GDP dynamics, key economic indicatorsThe rating agency cut the GDP estimate downward from 6.7-6.8 per cent earlier to 6.4-6.5 per cent for FY20 with the underlying GVA growth of 6.3-6.4 per cent.

CARE Ratings on Thursday revised India’s GDP growth forecast on account of subdued growth in the industrial sector and weakness in the agricultural sector during Q1FY20. The rating agency cut the GDP estimate downward from 6.7-6.8 per cent earlier to 6.4-6.5 per cent for FY20 with the underlying GVA growth of 6.3-6.4 per cent. “In the light of sharp economic growth slowdown in Q1FY20 and with consumption and investments unlikely to see a sharp upward shift, the improvement in the economic growth would only be gradual and limited,” it added. India recorded a dismal GDP growth of 5 per cent in the first quarter of the ingoing fiscal, on account of slower growth in manufacturing sector.

On Wednesday, rating agency CRISIL had cut India’s fiscal year 2020 GDP growth forecast to 6.3 per cent from its earlier forecast of 6.9 per cent. The agency said that lower GDP growth forecast corroborates that India’s economic slowdown is deeper and more broad-based than suspected. The GDP will have to grow in the range of 6.8-6.9 per cent during July 2019- March 2020 (9 month period) so as to grow at 6.4-6.5 per cent during FY20.

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Even the RBI had lowered its outlook for the FY20 at its August meeting. Various other global brokerages including Nomura, DBS, among others have cut India’s growth forecast for the ongoing fiscal.

“110 bps interest rate cut by the RBI. (The RBI has mandated banks to link all their fresh loans extended to retail and MSME sector to an external benchmark from October 1, 2019. The impact will be seen on the incremental loans extended to these sectors and will help facilitate transmission mechanism.),” CARE Ratings said in the report. The agency also expects the demand to pickup in the festive season. Even favourable monsoons may come out good for rural incomes. “Better business environment on account of the recent measures announced by the government including efforts to improve the flow of credit as well as transmission mechanism,” it added.

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