India's economic growth momentum is expected to slip further as there is no quick fix solution for the structural issues that the economy is facing, says a report.
According to D&B Economy Observer, the lackluster growth in the Index of Industrial Production (IIP) is expected to prevail as the manufacturing sector is facing multiple challenges which will take time to get resolved.
D&B expects IIP to have remained subdued and grown by 2.5-3 per cent during July this year.
The report noted that fiscal stimulus by government and the policy rate cuts by the Reserve Bank of India along with other initiatives are likely to offer some respite to corporates.
However, a comprehensive/wide-ranging reform package will be required to address the various issues at the sectoral level, it noted.
"The ongoing multiple issues in the global and domestic economy are expected to drag down India's growth further. There is no quick fix solution for the structural issues at the sectoral level and, therefore, it is highly unlikely that there will be quick turnaround of the growth momentum," said Arun Singh, Chief Economist Dun & Bradstreet India.
Singh further said, the government's comprehensive measures and suitable interventions for different segments of the economy was much needed. Most importantly, it would help in reviving the overall sentiment immediately for the consumer and should support and encourage private investment.
The government on Friday announced a raft of measures, including rollback of enhanced super-rich tax on foreign and domestic equity investors, exemption of startups from 'angel tax', a package to address distress in the auto sector and upfront infusion of Rs 70,000 crore to public sector banks, in efforts to boost economic growth from a five-year low.
To bolster consumption, the government also said that banks have decided to cut interest rates, a move that would lead to lower monthly installments for home, auto and other loans.
Singh noted that "without gainful employment opportunities, skewed distribution of income and dependence of majority of the population on the vagaries of the monsoon, it would not help much in pushing the consumption bandwagon".
On the price front, the report said that lower economic activity along with subdued demand conditions and low commodity prices globally are likely to keep inflation benign.
D&B expects the consumer price index (CPI) inflation to be lower than the previous month and remain in the range of 3.2-3.4 per cent and wholesale price index (WPI) inflation to be in the range of 1.1-1.3 per cent during August this year, respectively.