Global analytical firm CRISIL has cut India's GDP growth forecast for this fiscal by 20 basis points to 6.9 percent citing weak monsoon, slowing global growth, and sluggish high-frequency data for the first quarter.
The firm, in its latest report on the outlook for India in the financial year 2019 titled ‘Uphill trek’, has said that while the slowdown would be significant in the first half of this fiscal, the second half is expected to find support from expected monetary easing, consumption, and statistical low-base effect.
Agricultural terms of trade are also expected to improve with a pick-up in food inflation, it said, adding that farmers would benefit from income transfer of Rs 6,000 per year, and farm loan waivers in some states.
“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 percent 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 and CEO, CRISIL said in the statement.
India’s impressive growth, which was 8.2 percent in fiscal 2017, the fastest in a decade, was affected by disruptions stemming from policy initiatives and reforms, and rising global uncertainty including from trade disputes, it noted.
According to the firm, corporate revenue growth will slip back to single-digit after two fiscals, at a rate of 8 percent, reversing the trend of double-digit growth in the past two fiscals.
“Sales volume in the automobiles sector will be impacted by a trifecta – of spurt in costs due to changes in regulation, tightening liquidity, and moderating income growth. Somber farm incomes will also weigh on rural-led segments such as FMCG," said Prasad Koparkar, senior director, CRISIL Research.
On the banking sector, it said the non-performing assets (NPAs) are expected to decline to 8 percent by this fiscal end from the peak of 11.5 percent in FY18 on the back of lower accretion and increased recoveries.It added that growth for NBFCs, particularly in the retail segment, will likely pick up gradually as they have "used this opportunity to correct their asset-liability mismatches and have reduced reliance on short-term market borrowings, which is a positive for the sector."