India is just a few months away from Lok Sabha polls, and top organisations are cutting the country's economic growth projection. Here's why
India is just a few months away from Lok Sabha polls, and top organisations are cutting the country’s economic growth projection. From Crisil, Fitch Ratings to the Organisation for Economic Co-operation and Development, all three have cut India’s economic growth projection to 7.4%, 7.2% and 7.3% respectively. Only the Reserve Bank of India (RBI) has retained the GDP growth projection at 7.4%.
The reason is India’s disappointing Q2 numbers, which showed a massive fall in growth from 8.2% to 7.1% despite a favourable base effect. “For fiscal 2019, we have lowered our GDP growth forecast by 10 basis points (bps) to 7.4% from 7.5% estimated earlier. Forecasts of lower global trade and GDP growth has created a downward bias to growth in emerging economies,” Crisil said in a statement.
Fitch Ratings on Thursday lowered India’s GDP growth forecast to 7.2% for current fiscal, from 7.8 per cent projected in September, citing higher financing cost and reduced credit availability. “We have lowered our growth forecasts on weaker-than-expected momentum in the data (GDP),” it added.
Not only rating agencies but several economists as well said that there was a need to revise down FY19 growth numbers after the Q2 GDP was released. “There is a need to revise down growth projections as growth for the whole fiscal year could remain at around 7%,” said NR Bhanumurthy, an economist at National Institute of Public Finance and Policy.
SBI Chief Economist Soumya Kanti Ghosh said that trade and finance have remained stuck at 6%-6.5% for the two-three quarters now. Moreover, consumption lately has declined, which will in turn impact investment in the coming days. “The outlook does not look rosy,” Ghosh said.