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16 Aug 2018
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Indian economy is projected to grow at 7.2
per cent in 2018-19, India Ratings and Research (Ind-Ra) today said. The rating
agency earlier forecasted India’s economic growth at 7.4 per in current fiscal.
The key reason for this, Ind-Ra said, is the upward revision in the estimation
of inflation for 2018-19 due to increasing crude oil prices and the
government’s decision to fix the minimum support prices of all kharif crops at
1.5 times the production cost (A2+FL). The rating agency in a report titled
‘Mid-year FY19 Outlook’ said it believes the other headwinds lurking on the
horizon are rising trade protectionism, depreciating rupee and, no visible
signs of the abatement of the non-performing assets of the banking sector.
“Furthermore, it is taking a tad longer than
expected to resolve cases under the Insolvency and Bankruptcy Code. “This
simply means ‘bringing the stuck capital back into the production process to
enhance the productivity of capital’ will be a long drawn-out affair,” Ind-Ra
said. Ind-Ra said it expects private final consumption expenditure to grow 7.6
per cent in 2018-19 compared to 6.6 per cent in 2017-18. The Total Investment & Insurance Solutions
The rating agency pointed out that government
capex alone will be insufficient to revive the capex cycle, as its share in the
total capex of the economy was only 11.1 per cent during 2012-17. “On the other
hand, the share of private corporations was 40.9 per cent. As private corporations
in combination with the household sector command 77.5 per cent of the total
investment in the economy, their capex revival is a must for a broad-based
recovery in the investment cycle,” it observed. The Total Investment & Insurance Solutions
Noting that India will face continued headwinds
on the exports front, the rating agency said although it expects the annual
value of exports to touch USD 345 billion in the current fiscal, crossing the
peak of USD 318 billion attained in 2013-14. Ind-Ra said it expects average
retail and wholesale inflation in 2018-19 to come in at 4.6 per cent and 4.1
per cent, respectively, as against 4.3 per cent and 3.4 per cent forecasted
earlier. “Ind-Ra expects CAD to widen to USD 71.1 billion in 2018-19 from USD
48.7 billion in 2017-18,” it said.
On rupee, the rating agnecy said that in
2018, rupee has already depreciated 7.7 per cent till July in response to
elevated global turbulence, worsening of current account, rising inflation and
concerns related to fiscal deficit. Ind-Ra said it has maintained a stable
outlook on the finances of Indian states for 2018-19. “Ind-Ra expects the
aggregate fiscal deficit of the states to moderate to 2.8 per cent of GDP,”
Ind-Ra said.The Total Investment &
Insurance Solutions
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