India’s GDP growth cut to 6.9% by CRISIL; these 3 key concerns weigh

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Updated: August 1, 2019 3:20:54 PM

Days after the International Monetary Fund (IMF) cut India’s growth projections, rating agency CRISIL on Thursday slashed FY20 GDP growth rate estimates, citing muted monsoon, sluggish global growth and weak high-frequency data for Q1 of the ongoing fiscal as key reasons.

It pointed out that India's public investment in R&D as a fraction of GDP has remained stagnant over the last two decades. (Representational image)The estimates are in sync with the projections of several other agencies whose estimates range between 6.6 and 7.5 per cent.

Days after the International Monetary Fund (IMF) cut India’s growth projections, rating agency CRISIL on Thursday slashed FY20 GDP growth rate estimates, citing muted monsoon, sluggish global growth and weak high-frequency data for Q1 of the ongoing fiscal as key reasons. The growth estimates by 20 bps to 6.9 per cent for this fiscal, CRISIL said in a report. The estimates are in sync with the projections of several other agencies whose estimates range between 6.6 and 7.5 per cent. CRISIL follows IMF, Fitch, ADB and the RBI in slashing the earlier projection. All the institutions have commonly highlighted that both investment and consumption demand is currently low in India.

The slowdown would be more visible in the first half of the fiscal, even as following half should find support from the probable monetary easing, consumption, and statistical low-base effect, CRISIL said in the report. on the outlook for India in fiscal 2019 titled ‘Uphill trek’. With the rise in food inflation, the agricultural terms of trade are also expected to improve further, it added. Furthermore, the farmers are also expected to reap benefits from the income transfer of Rs 6,000 per year announced by the central government, and farm loan waivers in a few states.

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“Given the crosswinds, the sops announced so far might not be enough to pitchfork growth in this fiscal to, or above, the past 14-year average of 7% per annum. Policy action looks more attuned to consumption than investment demand, which means consumption will be the first to ascend as the tide turns”, Ashu Suyash, Managing Director & CEO, CRISIL said.

Meanwhile, Indranil Sen Gupta of BofAML had told CNBC TV18 on Wednesday that the GDP growth may see a substantial cut if a recession hits the global economy. The growth rate is expected to fall by 100-125 bps in FY21 if there is a global recession, he had also said.

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