Ind-Ra revises up growth forecast to 7.4% for FY19 on strong agri growth

Agriculture, industry to boost growth

India Ratings and Research (Ind-Ra) has scaled up its projections for economic growth to 7.4 per cent, from the earlier 7.1 per cent, for 2018-19 on expectations of strong agricultural and industrial growth.

This is somewhat different from IHS Markit, a compiler of the purchasing managers’ index, which had recently lowered its FY19 growth projection to 7.3 per cent, from 7.4 per cent earlier, on account of weak demand. 

Earlier, the International Monetary Fund had projected India’s economy to grow at 7.4 per cent in FY19, while the World Bank expects the economy to grow at 7.3 per cent in FY19.

The Economic Survey had pegged economic growth at 7-7.5 per cent for the year. 

The second Advance Estimates released by the Central Statistics Office (CSO) had pegged FY18 growth at 6.6 per cent, down from 7.1 per cent in the previous financial year. The Union Budget for 2018-19 had projected nominal gross domestic product (GDP) to grow at 11.5 per cent. By comparison, Ind-Ra expects nominal GDP to grow at 10.9 per cent. 

Source: India Ratings and Research

Ind-Ra has upped its forecast for gross value added (GVA) by agriculture to 3 per cent in FY19, up from its earlier forecast of 2.7 per cent, on account of a good monsoon. The private weather forecasting agency Skymet has predicted that the southwest monsoon is likely to be normal at 100 per cent of the long-term average. For June to September, the long-term average is around 887 millimetres.

In the second Advance Estimates, the CSO had pegged agricultural growth at 3 per cent in FY18, down from 6.3 per cent in FY17. Ind-Ra expects GVA by industry to grow at 7 per cent in FY19, up from 4.8 per cent in FY18, while the services sector is expected to grow at 8.6 per cent in FY19, up from 8.3 per cent in the previous year. It expects the current account deficit at 2.1 per cent of GDP in FY19, up from 1.6 per cent in FY18. However, the rating agency cautioned that “the economy is facing a number of headwinds, ranging from non-performing assets of the banking system and elevated bond yields to increased trade protectionism and tightening global financial conditions.”