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23
January 2019
 |
GDP
(The Total Investment & Insurance Solutions)
India's growth rate is likely to inch up to
7.3 per cent in 2019-20, provided that there are normal rains and a stable
political outcome of the general elections, Crisil Ratings said Wednesday.
India is expected to clock a growth rate of
7.2 per cent in the current financial year, up from 6.7 per cent in 2017-18.
"In fiscal 2020, Crisil expects GDP to grow 7.3 per cent on assumptions-
normal rains, oil prices lower than 2018, stable political outcome," the
rating agency said in its 'India Outlook FY20'. It said with the government
likely to stick to a fiscal consolidation path, the pick-up in growth is
expected to be only gradual.
"A change in the growth mix is on cards,
with private sector likely to take over the baton from the government,"
Crisil said. Stating that fiscal health remains a "key risk", Crisil
said the fiscal deficit is likely to be 3.3 per cent of the gross domestic
product (GDP) in the next fiscal. The deficit is budgeted at 3.3 per cent in
the current fiscal.
Crisil, however, cautioned that if the
general elections this year yield a fractured mandate and derail/delay the
process of reforms, "the implications on sentiments, investments and
growth could be adverse". It said global crude oil prices are expected to
soften to settle at around USD 60-65 average per barrel in fiscal 2020,
compared with USD 68-72 average per barrel in fiscal 2019 as overall global
demand slows.
"However, some price pressure could be
felt in response to the recently announced supply cuts by the Organization of
Petroleum Exporting Countries (OPEC)," it said. It said fiscal 2019 would
be the second consecutive year of sub-4 per cent Consumer Price Index
(CPI)-based inflation. From an average 4.5 per cent in fiscal 2017, CPI
inflation fell to 3.6 per cent in fiscal 2018. "We estimate it at 3.7 per
cent for fiscal 2019, given the continuous and sharp decline in food prices and slowdown in global crude oil
prices compared with a few months ago," Crisil said. It said the current
account deficit (CAD) would reduce to 2.4 per cent of GDP in fiscal 2020 from
2.6 per cent in fiscal 2019.
The
rupee, Crisil expects, will remain volatile and settle at 72 to a dollar on an
average by March 2020, compared with an estimate of 71 to a dollar by March
2019. "Low crude oil prices and slowing pace of monetary policy
normalisation in the US will support the rupee, so we see only a modest
weakening.
But given that India runs a CAD, the rupee
remains exposed to volatility emanating from oil, tariff wars, and monetary
policy surprises from the advanced countries," Crisil said. Crisil said
domestic interest rates, which had risen last year, are expected to soften in
fiscal 2020. "With inflation under control, softer crude oil prices
relative to last year, we believe the Monetary Policy Committee would change
its stance to neutral from calibrated tightening and could cut the repo rate by
at least 25 basis points (from 6.50 per cent currently)," it added. The Total Investment & Insurance
Solutions
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