Amid GDP growth fall, ICRA says there’s a ray of hope for economy

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Updated: November 21, 2019 4:27:59 PM

India’s growth rate is expected to fall further in Q2FY20 on account of weakening momentum in the industry, even as agriculture and services may continue to grow, a rating agency said.

GDP growth averages 8% (new series) for 2005-11, and then 6.8% for 2012-19.Heavy rainfall, along with delayed monsoon withdrawal negatively impacted mining and construction activity, ICRA said.

India’s growth rate is expected to fall further in Q2FY20 on account of weakening momentum in the industry, even as agriculture and services may continue to maintain growth posted in the first quarter, a rating agency said. The GDP and GVA at basic prices in on-year terms is expected to stand at 4.7 per cent and 4.5 per cent, respectively, in the second quarter of the ongoing fiscal, from 5 per cent and 4.9 per cent, respectively, in Q1FY20. “With subdued domestic demand, investment activity, and non-oil merchandise exports weighing upon volume expansion, manufacturing growth is expected to decelerate further from the marginal 0.6% in Q1 FY2020. To some extent, lower raw material costs would bolster earnings, and may prevent manufacturing GVA from slipping into a YoY contraction in Q2 FY2020,” Aditi Nayar, Principal Economist, rating agency ICRA, said.

Heavy rainfall, along with delayed monsoon withdrawal negatively impacted mining and construction activity, the report added. However, a sharp pickup in spending by the government in Q2FY20 after the budget and improved profitability metrics revealed by the earnings of some banks would support service sector growth, Aditi Nayar also said.

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Moody’s Investors Service, in October, cut India’s gross domestic product (GDP) growth forecast for FY20 to 5.8 per cent from the earlier estimate of 6.2 per cent. It expects growth to surge to 6.6 per cent in FY21 and around 7 per cent over the medium term. It expects growth to rise to 6.6 per cent in FY21 and around 7 per cent over the medium term. India’s economic growth fell to a six-year low of 5 per cent in the April-June quarter and, according to the Reserve Bank of India (RBI), is likely to be near this trough at 5.3 per cent in the September quarter.

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