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HDFC Bank pegs GDP growth at 7.3% in FY19 on rural push, consumption surge

It also warned of a surge in oil prices causing the 'twin deficit' problem with a surge in fiscal and current account gaps

Press Trust of India  |  Mumbai 

GDP, economic growth
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Second largest private sector lender expects an uptick in in FY19 to 7.3 per cent from the 6.5 per cent estimated for FY18, expecting a rural push by Government and rise in consumption.

"We expect to pick up to 7.3 per cent in FY19 and the growth to stand at 7.1 per cent," its economists said in a note.

The government's official estimate for FY18 growth stands at 6.5 per cent, much lower than what experts would call as the potential, and restricted by the implementation and effects of the

said a normal monsoon will support rural consumption and additionally, help will also come from farm loan waivers. A surge in salaries for government servants through the implementation of the seventh pay commission will also help.

The Government will focus on rural sector and infrastructure, including road, railways and affordable housing, it said.

Efficiency gains from rollout and a disappearance of the reverses will give a positive base effect for the growth, it said.

On the negative side, it warned of a surge in causing the 'twin deficit' problem with a surge in fiscal and current account gaps, sluggish global growth and a rise in consumption restricting the consumption.

Even as it put governments at the centre and states adopting fiscal consolidation path as one of the factors which can negatively impact growth, it estimated the central government to not narrow the FY19 to the targeted level of 3 per cent under an adopted path.

It said the for FY19 will come at 3.2 per cent. The bank economists also expect the current account deficit to widen to 2.5 per cent for FY19, from the 1.5 per cent expected for FY18.

On the front, it said price-rise will peak to 6 per cent by mid-2018 on a low base and cool-off in the second half of the financial year.

It expects a hike of 0.25 per cent in the policy rate by the Reserve Bank during the financial year 2018-19.

Even as the CSO data estimated an uptick in gross fixed capital formation, said this is due to a very low base in FY17.

The capacity utilisation rates in the economy continue to be low, impeding the private capex cycle, it said.

First Published: Wed, January 10 2018. 17:40 IST