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  1. GDP growth may pick pace in FY19 as GST smoothens, rural demand improves; but watch out for concerns

GDP growth may pick pace in FY19 as GST smoothens, rural demand improves; but watch out for concerns

Even though GDP growth in FY18 has been recorded at its lowest levels in the last four years of the Narendra Modi government, the economy is expected to grow at a faster rate in the fiscal year 2019 as goods and services tax (GST)-related disruptions smoothen and consumption improves amid government spending.

By: | Published: June 1, 2018 12:27 PM
GDP, CSO, National Democratic Alliance, gross value added, Subhash Chandra Garg, economic growth The economy posted a 7.7 percent growth in January-March quarter of same fiscal.

Even though GDP growth rate in FY18 has been recorded at its lowest levels in the last four years of the Narendra Modi government, economy is expected to grow at a faster rate in fiscal year 2019 as goods and services tax (GST)-related disruptions smoothen and consumption improves, research firms said. The GDP growth rate in 2017-18 has been recorded at 6.7 percent, lowest in the last four years. The economy posted a 7.7 percent growth in January-March quarter of same fiscal.

CARE Ratings said: “We expect the Indian economy to grow at around 7.5 percent in FY19. The growth is likely to realize from pick up in consumption especially rural consumption with the forecast of normal monsoon, increased public sector spending and the uptick in the performance of the manufacturing sector in the upcoming quarters.”

“We expect the economy to recover to 7.1 percent in fiscal year 2019 as GST-related disruptions smoothen and consumption improves amid government spending,” Kotak Institutional Equities said. Some cyclical recovery from the demonetisation and pre-GST implementation phase can also be observed in the economy as reflected in selected activity indicators and improving corporate earnings, Kotak added.

According to data released by the Central Statistics Office (CSO) on Thursday, the Q4FY18 GDP expansion that came on a 6.1 percent growth in the year-ago quarter was much higher than (revised) 7 percent in the previous quarter (Q3FY18). The manufacturing sector is expected to benefit in first quarter of 2018-19 due to favourable base effect, CARE Ratings said. In addition, the investment rate has seen some improvement on the quarterly basis and is expected to maintain the momentum going ahead, it added.

Concerns

Kotak said that the structural bottlenecks in economy can be removed through improvement in the twin balance sheet problem. Nevertheless, weakening global growth momentum and rising crude oil prices could act as obstacles for growth.

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