CRISIL cuts FY14 GDP growth forecast to 6%

Maintains growth forecast for agriculture but expects industry, services to grow at lower rate

CRISIL Research has cut its GDP growth forecast for India for 2013-14 to 6% from 6.4% expected earlier.

“We maintain our agriculture GDP growth forecast of 3.5%, but expect industry and services to grow at a lower rate of 4.4% and 7.3% respectively,” the research agency said.

According to CRISIL, the reasons for the downward revision in GDP growth are weaker-than-anticipated pick-up in household consumption demand, which will act as a drag on manufacturing sector recovery.

Crisil also attributed the low growth to downward rigidity in lending rates, with the pass-through of any repo rate cuts expected to begin only in the second quarter of 2013-14.

It listed lowering of the Euro zone GDP growth forecast for 2013 to -0.5% from -0.1% earlier and issues related to mining and lack of speedy project clearances, which continue to hurt manufacturing, infrastructure and investment activity, as other reasons for cut in growth forecast.
 
“Although we continue to believe that GDP growth in 2013-14 will be greater than last year’s 5%, the recovery is fragile and hinges critically on a normal monsoon. If the monsoons were to fail this year, resulting in no growth in agriculture, then GDP may grow by only around 5.1%. Economic recovery beyond 2013-14 depends on revival of private corporate investment,” CRISIL added.