Crisil Lowers India's GDP Growth Estimate By 20 BPS To 6.9 Per Cent

Analytics firm Crisil on Thursday lowered its estimate of India's GDP growth by 20 basis points to 6.9 per cent for the current fiscal ending March 2020 due to downside risks like weak monsoon and slowing global growth. In June, the Reserve Bank of India had lowered the economic growth forecast for fiscal 2019-20 to 7 per cent from its April estimate of 7.2 per cent due to a slowdown in domestic activities and escalation in global trade war.

In a report, Crisil said the slowdown would be pronounced in the first half of the fiscal, while the second half should find support from expected monetary easing, consumption, and statistical low-base effect.

"With the Indian economy caught in crosswinds, we now expect gross domestic product (GDP) to grow 6.9 per cent this fiscal, or 20 basis points lower than what we had envisaged earlier.

"The revision factors in a triangulation of downside risks: inadequate monsoon, slowing global growth, and sluggish high-frequency data for the first quarter," said the report on the outlook for India in fiscal 2019, titled 'Uphill trek'.

It noted that India's GDP had grown at an impressive 8.2 per cent in fiscal 2017, the fastest in a decade.

This was followed by disruptions stemming from policy initiatives and reforms, and rising global uncertainty including from trade disputes -- which together triggered a cyclical downturn, Crisil said.

The non-bank (including housing finance companies) crisis, which began late last fiscal, and the stress that ensued, slowed disbursals and further impacted household demand, which had already moderated amid lower incomes, weak sentiment and rising costs (fuel prices and insurance for automobiles), it added.

With access to funding becoming a challenge and non-banks caught up in managing liquidity, their growth halved to a multi-year low in the second-half of last fiscal, and remains impacted, said Crisil.

As per the Central Statistics Office (CSO), India's GDP slowed to a five-year low of 5.8 per cent in the January-March quarter of 2018-19.

As per the Economic Survey for 2018-19, tabled by Finance Minister Nirmala Sitharaman in Parliament last month, the real GDP growth for the year 2019-20 is projected at 7 per cent, reflecting a recovery in the economy after a deceleration in growth momentum throughout 2018-19.

HIGHLIGHTS

• Inadequate monsoon, slowing global growth are factors for lower forecast.
• Apart from this, sluggish high-frequency data has been cited by CRISIL.
• Non-bank, including housing finance firms, crisis has added to chaos.