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Ind-Ra pegs India’s economic growth at 7.5% for FY20
Jan-18-2019

India Ratings and Research (Ind-Ra), a Fitch Group company, in its latest report has stated that India’s Gross Domestic Product (GDP) growth is likely to grow a tad higher at 7.5% in 2019-20 (FY20) on account of steady improvement in major sectors -- industry and services. After demonetisation and Goods and Services Tax (GST), the agency had expected 2018-19 to be a year of quick recovery and, indeed, the recovery has been sharp with GDP growth coming in at 7.2%.

The rating agency further said GDP growth would have been even better but for the global headwinds caused by an abrupt rise in crude oil prices and strengthening of the US dollar, among other factors. However, GDP growth in 2019-20 will be more dispersed and evenly balanced across sectors as well as demand-side growth drivers.

Over the past few years, private final consumption expenditure and government final consumption expenditure have been the primary growth drivers of Indian economic growth. Ind-Ra believes that investments are slowly but steadily gaining traction, with gross fixed capital formation growing 12.2% in the current fiscal and projected to clock 10.3% in the next year.

Ind-Ra added that this is certainly a comforting development, but the flip side of this development is that it is primarily driven by the government capex (capital expenditure), as incremental private corporate capex has yet to revive. It further said that due to the slowdown in private corporate and household capex, GDP growth has failed to accelerate and sustain itself close to or in excess of 8%.

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