LIVE TV
ZEE Business
ZEE BUSINESS
हिंदी में पढ़ें  हिंदी में पढ़ें
Live TV
Live TV
  • Home
  • Budget 2021
  • Personal Finance
    • PPF
    • Mutual Funds
    • Income tax
    • EPFO
    • Income Tax Calculator
    • Personal Loan Calculator
    • Car Loan Calculator
    • Home Loan Calculator
    • SIP calculator
    • SWP Calculator
    • MF Returns Calculator
    • Lumpsum Calculator
  • India
    • Companies
    • Property
    • Startups
    • Uidai
  • Economy
    • Aviation
  • Tech
    • Mobiles
    • Apps
  • Auto
    • Cars
    • Bikes
  • Markets
    • Commodities
    • Currency
  • Jobs
  • Indian Railways
  • World
    • Economy
    • Politics
    • Markets
  • videos
  • photos
  • Authors
  • More ...
    • VIDEOS
    • PHOTOS
Read in App
Business News » India News

Experts split over Indian economy; here is what makes economists cut growth forecast

In a latest move, the International Monetary Fund (IMF) has trimmed India's GDP growth forecast for Indian economy to 7.3% for FY19 fiscal from previous 7.5%.  

  • Twitter
  • Facebook
  • Linkedin
  • whatapp
  • View in App
Experts split over Indian economy; here is what makes economists cut growth forecast
Representational Image: Photo: IANS
Written By: Pooja Jaiswar
Updated: Wed, Jul 18, 2018
12:05 pm
Mumbai, ZeeBiz WebDesk
RELATED NEWS
Positive events improve India's Q2 GDP projections, reveals SBI Ecowrap Report - Check  HIGHLIGHTS here Positive events improve India's Q2 GDP projections, reveals SBI Ecowrap Report - Check HIGHLIGHTS here
Budget 2019: Economic Survey sees economy at $5 tn, 8% growth rate; here's what FM Sitharaman can do to boost GDP Budget 2019: Economic Survey sees economy at $5 tn, 8% growth rate; here's what FM Sitharaman can do to boost GDP
India GDP 2019-20: Good news! Political stability, repo rate cut to push growth up to 7.5% in H2, says RBI India GDP 2019-20: Good news! Political stability, repo rate cut to push growth up to 7.5% in H2, says RBI
India's GDP growth rate comes in at 5.8% in Q4FY19 - Here's how various sectors performed India's GDP growth rate comes in at 5.8% in Q4FY19 - Here's how various sectors performed
Bull run! Forget 12k, 13k marks, Nifty 50 seen at breathtaking heights - 15k-level Bull run! Forget 12k, 13k marks, Nifty 50 seen at breathtaking heights - 15k-level

When India came back to record GDP growth of 7.7% in last quarter of FY18 (Q4FY18), everything seemed well for the road ahead. With the latest growth rate, Indian economy is now standing at 18-month high, which is a strong agenda for Prime Minister Narendra Modi government who is preparing for upcoming 2019 general election. It felt like a ray of hope for Modi-government and it would not be wrong they did get saved with this economic growth, considering all those criticism cited by Opposition parties and many experts over their bold launch of demonetisation and Goods and Services Tax (GST). Now time has changed, where everything seemed bright, experts are now having two opinions over the Indian economy’s growth ahead, and guess what! Not only notebandi and GST continue to hamper it, there is a bucket full of negative issues hovering over India. 

In a latest move, the International Monetary Fund (IMF) has trimmed down their GDP growth forecast for Indian economy to 7.3% for FY19 fiscal from previous 7.5%. However, the country still remains on top spot in global growth but such cut after 7.7% number in Q4FY18 raises eyebrows. 

IMF was not alone, even Fitch Rating expects the same growth for FY19. According to Fitch Ratings, temporary drag is still there from demonetisation and GST. Though they will cool down in years to come ahead, but for now they pinching the economic growth.  Even Asian Development Bank (ADB), World Bank also project 7.3% growth rate for India’s GDP for entire FY19. 

source: tradingeconomics.com

The Reserve Bank of India (RBI) projected 7.3% GDP growth rate in first half of FY19, while a rate of 7.4% in second half. 

On the other hand, Deutsche Bank has estimated a 7.5% growth rate for FY19. Similar expectations were from Care Ratings. 

Shockingly, a recent report of Motilal Oswal predicts even lower GDP growth rate. Analysts of this broking firm said, “We expect real GDP growth to stay strong at 7.5-8% in 1QFY19, as against 7.7% YoY in 4QFY18. Nevertheless, we expect growth to peak out in 1QFY19 and weaken for the remaining three quarters of FY19. Accordingly, we continue to expect real GDP to grow by sub-7% for the second consecutive year in FY19.”

Where is Indian economy headed that would be interesting to watch when experts are of two opinions. For now, these are the list of issues that will definitely make an impact on the country and hence the NDA government. 

Trade deficit would be one big issue that will give sleepless night to the government. Trade deficit widened sharply to US$16.6bn, near its previous 5-year peak when crude oil was hovering ~US$100/bbl. Pace of growth in exports and imports remained strong at 17.6% yoy and 21.3% yoy, respectively. 

Dhananjay Sinha and Kruti Shah said, “We expect India’s trade deficit to remain elevated in the backdrop of rising commodity prices, recovery in domestic demand conditions and mounting global trade restrictions. Trade deficit in Q1FY19 is likely to widen near a 5-year high of 2.5-2.7% of GDP on sharply wide merchandise deficit and relatively insignificant movement in invisibles (to offset such a sharp rise in trade deficit).” 

The duo added, “The overall BoP position in Q1FY19 is likely to witness depletion in foreign exchange reserves by US$14bn, which would be the highest since Dec’08.”

Further monetary policy tightening because of higher inflation prediction ahead will have its own thunder in the economy. 

HSBC Global Research expects inflation could rise to 5.2% in FY19 (from 3.6% last year). Considering this,  they have brought forward their expectation of a 25bp repo rate hike to August (from October), and have added a 25bp rate hike in 4Q 2018.

Government delivered on its promise to raise MSPs but has not revealed its procurement strategy. HSBC said, “Our base case scenario combining traditional procurement for paddy (rice), and direct compensation to farmers for other crops suggests that inflation could rise by 25bps in FY19 (50bps in 2H).”

HSBC says, “Thanks to lower inflation and exchange rate volatility, reduced trade openness, and Local Currency Pricing of imports, India's Exchange Rate Pass through (ERPT) coefficient has fallen. Yet, given its large propensity to import, a 6% Rupee depreciation could add 25bps to inflation.”

Rising crude oil will not just impact trade deficit, they will also impact inflation. It is being expected that, this could increase inflation by 40 basis point ahead. 

Anagha Deodhar analysts at ICICI Securities said, “Although investments are growing well, weakening growth in private consumption is a cause of concern.”

Private consumption growth decelerated to 13-quarter low of 2.7% while full-year private consumption growth stood at 5.4%. This indicator stayed at 6.6% mark in both Q1FY18 and Q2FY18. Further it decelerated to 5.6% in Q3FY18 when GDP rose to 7%, and now it has dropped to 2.7% where India has seen a massive 7.7% growth rate.

What adds to the shocks is the deficit monsoon. Recently, a Skymet report revealed that monsoon remained in deficit and June has ended with countrywide rainfall deficiency of 5%. July too began on a deficit note, which did not improve and rather increased to 9% in the first week of July. 

In India farm output depends on rains to a 55% extent. Not only this even, India obtains over 75% of its water through rains. If there is deficit monsoon, than crops like rice, oil seeds, pulses and cereals see a delay in their growth. This can even lead to crop failure across regions.

Apart from the above factors, IMF also revealed that possible triggers include rising trade tensions and conflicts, geopolitical concerns, and mounting political uncertainty will also play their role. 

Get Latest Business News, Stock Market Updates and Videos; Check your tax outgo through Income Tax Calculator and save money through our Personal Finance coverage. Check Business Breaking News Live on Zee Business Twitter and Facebook. Subscribe on YouTube.

TAGS:
India GDPIMFIndia GDP forecast
RELATED NEWS
Positive events improve India's Q2 GDP projections, reveals SBI Ecowrap Report - Check  HIGHLIGHTS here Positive events improve India's Q2 GDP projections, reveals SBI Ecowrap Report - Check HIGHLIGHTS here
Budget 2019: Economic Survey sees economy at $5 tn, 8% growth rate; here's what FM Sitharaman can do to boost GDP Budget 2019: Economic Survey sees economy at $5 tn, 8% growth rate; here's what FM Sitharaman can do to boost GDP
India GDP 2019-20: Good news! Political stability, repo rate cut to push growth up to 7.5% in H2, says RBI India GDP 2019-20: Good news! Political stability, repo rate cut to push growth up to 7.5% in H2, says RBI
India's GDP growth rate comes in at 5.8% in Q4FY19 - Here's how various sectors performed India's GDP growth rate comes in at 5.8% in Q4FY19 - Here's how various sectors performed
Bull run! Forget 12k, 13k marks, Nifty 50 seen at breathtaking heights - 15k-level Bull run! Forget 12k, 13k marks, Nifty 50 seen at breathtaking heights - 15k-level

LATEST NEWS

Stocks in Focus on March 3: MTAR Technologies IPO, Tata Power, IRCON, Telecom Stocks to Tyre Stocks; here are the 5 Newsmakers of the Day

NEET 2021 exam date latest news: Candidates check this big update

Tata Power DDL rolls out live peer-to-peer solar energy trading project

In chat with Anil Singhvi, analyst Vikas Sethi picks Phillips Carbon, L and T Finance as top buys for big gains

WhatsApp feature: Check account balance, fixed deposit (FD), credit card payment details via 1 message

JEE Main 2021 March application form released: See last date for application, exam dates and all other details here!

MTAR Technologies IPO subscription open from today; experts recommend 'SUBSCRIBE' for big listing gains

Ronaldo marks 600th league game with landmark goal as Juve beat Spezia

Bonanza Portfolio highlights trading strategy in Big Bulls Rakesh Jhunjhunwala recent pick during Covid Lockdown

Ayodhya airport to become functional in early 2022

  • India News
  • World News
  • Companies News
  • Market News
  • Personal Finance News
  • Technology News
  • Automobile News
  • Small Business News
  • Income Tax Calculator
  • Live TV
  • Videos
  • Photos
  • Author
  • Rss Feed
  • Advertise with us
  • Privacy Policy
  • Legal Disclaimer

Latest Trending Updates

  • EPFO
  • Budget 2020
  • Income Tax Return
  • Auto Expo 2020
  • Home Loan
  • Business News

Trending Topics

  • Income Tax
  • income Tax Calculator
  • 7th Pay Commission
  • Reserve Bank of India
  • GST
  • Latest Business News

Follow us on

zeebiz
zeebiz

Partner Sites

  • Zee News
  • Hindi News
  • Marathi News
  • Bengali News
  • Tamil News
  • Malayalam News
  • Gujarati News
  • Telugu News
  • Kannada News
  • DNA
  • WION
Copyright © Zee Media Corporation Ltd. All rights reserved