India Ratings and Research (Ind-Ra) has revised its 2019-20 India GDP growth forecast downwards to 5.6 per cent from an earlier estimate of 6.1 per cent.

The agency in a report also said new projections suggest that that GDP growth in the second quarter (2Q) of the current fiscal is likely to be 4.7 per cent.

"This revision became inevitable as high-frequency data now suggests that the agency's estimate of 2QFY20 GDP growth coming in a little higher than 5 per cent is unlikely to hold," Ind-Ra said in a statement.

"The new projection suggests that 2QFY20 GDP growth is likely to be 4.7 per cent. Despite favourable base effect, declining growth momentum suggests that even the 2H (second half)FY20 will now be weaker than previously forecasted and is likely to come in at 6.2 per cent."

The agency further noted that even a 5.6 per cent GDP growth will require "heavy lifting by the government".

"Although government expenditure did not witness much traction in 1QFY20 due to parliamentary elections, it picked up significantly in 2QFY20," the statement said.

"Combined capital and consumption expenditure of Central and 20 state governments in 2QFY20 grew 37.8 per cent and 20.1 per cent respectively, and Ind-Ra expects it to continue in 2HFY20 leading to Central government's fiscal deficit coming in at 3.6 per cent of GDP."

As per the statement, FY20 GDP growth can even come lower than 5.6 per cent, if the government continues to adhere to the budgeted fiscal deficit target of 3.3 per cent of the GDP by cutting expenditure.

Published On : 26-11-2019

Source : SME Times