CRISIL lowers growth forecast, GDP to grow at 7.6% in 2018-19

CRISIL reckons inflation will rise to 4.6% in 2018-19

Rating agency CRISIL has lowered its projection of India's economic growth in 2017-18 to 6.8 per cent from 7 per cent estimated earlier. 

The gross domestic product (GDP) will grow 7.6 per cent in 2018-19, which is also lower than CRISIL’s earlier forecast of 7.8 per cent.

The rating agency projected inflation based on the consumer price index (CPI) will be 4 per cent in 2017-18. This is higher than the 3.7 per cent forecast by the Reserve Bank of India. CRISIL reckons inflation will rise to 4.6 per cent in 2018-19.

The RBI's monetary policy committee has revised its inflation forecast for the next two quarters from 4.2-4.6 per cent to 4.3-4.7 per cent. CPI inflation rose to a 15-month high of 4.88 per cent in November, up from 3.58 per cent in October. 

CRISIL’s estimate of 6.8 per cent growth for 2017-18 requires the GDP to expand by 7.5 per cent in the second half of the year after having expanded by 6 per cent in the first half. “As much as 7.5 per cent growth in the second half could come due to the base effect,” CRISIL Chief Economist DK Joshi said.

India’s economic growth slowed down in the second half of 2016-17 due to demonetisation. The GDP expanded by 6.9 per cent in the third quarter and by 6.1 per cent in the fourth quarter of 2016-17, yielding 6.5 per cent growth in the second half of the previous fiscal year.

The farm sector was expected to grow 3 per cent in 2017-18, CRISIL said. As much as 50 per cent of agricultural production was now contributed by horticulture and livestock, Joshi said.

The investment rate would continue to decline in 2018-19, after which it would grow as fast as the GDP, Joshi said.

He said India was not reaping the benefits of a global economic recovery due to the effects of demonetisation and the roll-out of the goods and services tax (GST).

The IMF has projected the world economy will grow 3.6 per cent in 2017, up from 3.2 per cent in 2016, which was the weakest pace of growth since the 2008 global financial crisis. Advanced economies are expected to grow 2.2 per cent in 2017, up from from 1.7 per cent in 2016, while emerging market economies are expected to grow 4.6 per cent, up from 4.3 per cent.

ICRA sees IIP rebound in November

Rating agency ICRA expects growth in the index of industrial production (IIP) to rebound in November after touching a three-month low of 2.2 per cent in October. It is basing its forecast on lead indicators such as automobile production, coal output, cargo handled and rail freight.