Economists predict further growth cut, deeper interest-rate cuts amid GDP slump

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Updated: September 02, 2019 9:32 AM

Economists cut their forecasts for India’s economic growth and predicted deeper interest-rate cuts after data showed a sharper-than-expected slump in output.

Economists and experts too said the announcements made by the government will have a positive impact on the economy. (Representational image)The slump will put the onus on the Reserve Bank of India to continue cutting interest rates.
(Representational image)

Economists cut their forecasts for India’s economic growth and predicted deeper interest-rate cuts after data showed a sharper-than-expected slump in output. Goldman Sachs Group Inc. and Citigroup Inc. lowered their growth projections to 6% for the fiscal year through March 2020, while Oxford Economics Ltd. said there’s a risk the expansion could be weaker than that. Data late Friday showed gross domestic product rose 5% in the June quarter from a year ago, the slowest pace in six years and lower than all the forecasts in a Bloomberg survey of economists. The weakness was broad-based, with consumption and export growth slowing while investment remained subdued.

The slump will put the onus on the Reserve Bank of India to continue cutting interest rates after 110 basis points of easing already this year, the economists said. The government — which is sticking to its 7% growth projection for the fiscal year — has in recent days announced a number of steps to improve India’s longer-term growth, without providing any immediate support. It will merge state-run banks to help spur credit growth, ease foreign investment rules and give concessions on vehicle purchases.

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