India’s GDP growth is expected to fall further in the second quarter after touching a six-year low in the first quarter of FY20, SBI said in a research note on Tuesday.
India’s GDP growth is expected to fall further in the second quarter after touching a six-year low in the first quarter of FY20, SBI said in a research note on Tuesday. India’s GDP growth forecast for the ongoing fiscal to 5 percent from 6.1 percent earlier, owing to global economic slowdown coupled with domestic concerns. The GDP growth may fall down further from 5 percent in Q1FY20 to 4.2 percent in Q2, owing to low automobile sales, a decline in air traffic movements, flattening of core sector growth and declining investment in construction and infrastructure, SBI Research also said. On the factory output shrinking to a nearly eight-year low, SBI said that it’s quite alarming. Index of Industrial Production (IIP) growth for September stood at (-) 4.3 per cent.
The Reserve Bank of India (RBI) is expected to announce large rate cuts in the December monetary policy seeing a slowdown in growth, it added. Even as the RBI has come up with several cuts over the period, such moves are unlikely to lead to any immediate material revival, it added. SBI also warned the government against policy surprises. Reliance on the monetary policy alone could be counter-productive, it added. “Against such growth slowdown, it is imperative that India (that is, the government) adheres to no negative policy surprises in sectors like Telecom, Power and NBFCs. For example, it is imperative that a lasting solution is worked out for the NBFC sector that has been much delayed now,” it said.
On the recent credit rating outlook cut by the global rating agency Moody’s, SBI Research said that a change in outlook from stable to negative will not have any significant impact. Meanwhile, India is seeing a slowdown for some time now on the back of a fall in consumption demand.