In yet another instance of a global firm reposing its confidence in the Indian economic expansion, Macquarie has said that the country’s GDP growth will bounce back to 7.2 percent on-year in the next calendar year 2018.
In yet another instance of a global firm reposing its confidence in the Indian economic expansion, Macquarie has said that the country’s GDP growth will bounce back to 7.2 percent on-year in the next calendar year 2018, supported by revival in rural consumption and improvement in exports. India’s growth rate will normalise in 2018 after a weak performance this year, Macquarie, the global investment banking and financial services group, said in a recent research report.
The growth expectations are built around an improved outlook for capital expenditure after the central government recently unveiled a Rs 2.11 lakh crore (representing 1.2 percent of GDP) recapitalisation package for public sector lenders which will be injected over two years.
Increased consumption, rural recovery and improved exports will fuel the GDP growth, Macquarie said. Based on an international economic expansion and better global growth forecast, Macquarie presumes a steady recovery in the Indian economy.
Recently, India’s GDP growth disappointed for the second straight quarter, slowing down to a mere 5.7 percent in Ap-Jun and pitting the country behind China on the list of world’s fastest growing major economies. The 5.7 percent fiscal first quarter GDP growth was much lower than the 7.1 percent seen in the same quarter a year ago, and from 6.1 percent in the preceding quarter. Much of the blame for this was put on the twin effects of GST and demonetisation.
Among the key takeaways from the report by Macquarie were the expected bounce back in consumption, and more importantly a pick up in rural demand. Nevertheless, urban consumption may not see more legs of growth anymore for some time, as per the brokerage firm. Exports may improve on the back of improved global growth forecasts, the report said.
Macquarie’s optimism on India’s economy comes amid a mixed sentiment on the country’s near-term economic future. Earlier this month, global rating agency Moody’s, which upgraded India’s sovereign credit rating to Baa2 from Baa3, said that the real GDP growth will moderate to 6.7 percent in the current fiscal 2017-18. Similarly, a recently released SBI research report said the country’s GDP is likely to remain below 6 percent in the second quarter of 2017-18 owing to muted agriculture growth and sluggish performance of manufacturing and mining sectors. Even the International Monetary Fund in October lowered India’s growth projection to 6.7 percent in FY 2017-18, 0.5 percentage points less than its previous two forecasts and slower than China’s 6.8 percent.
On the other hand, Goldman Sachs believes India’s economy will bounce back to 8 percent in the next fiscal 2018-19. Today, another firm Morgan Stanley said that all the drivers of growth would be in place in India by the next fiscal 2018-19. “The private capex joining in will bring the strength in India growth numbers that we are forecasting for it to go to 7.5 percent in March FY19,” Chetan Ahya, Co-Head of Global Economics & Chief Asia Economist, Morgan Stanley said in an interview to CNBC TV18 today.