SME Times News Bureau | 28 Aug, 2019
Fitch group firm India Ratings and Research
on Wednesday lowered its GDP growth forecast India to six-year low at 6.7 per
cent in the current fiscal as against 7.3 per cent projected earlier.
The 'band-aid' measures would not help the economy as it faces several cyclical
and structural issues, said the rating agency, referring to the recent stimulus
measures by the government to arrest slowdown in some key sectors.
With most engines of growth stuttering, the
economic slowdown would continue and the April-June GDP figure could slip to
5.7 per cent. The research and rating agency said that it would be the fifth
consecutive quarter of declining growth.
The agency does not see private investment, one of the key drivers of economic
growth, picking up anytime soon as manufacturing sector capacity utilisation
has hovered in the range of 70-76 per cent since FY14 and unless it reaches
optimum level, no company would make investments. Further, the stress in the
real estate sector continues.
Sunil Kumar Sinha, Principal Economist and Director (public finance) at the
ratings firm, said hoping that government expenditure alone would change the
investment landscape would be expecting too much.
The slowing economy could also mean businesses failing and hence a rise in
non-performing assets (NPAs) of banks.
Among the factors pulling down growth are slowdown in consumption, delayed and
uneven progress of monsoon, decline in manufacturing, inability of Insolvency
and Bankruptcy Code (IBC) to resolve cases in a time-bound manner and rising
global trade tension impacting exports.
Terming the recent measures announced by Finance Minister Nirmala Sitharaman as
insufficient to support high growth, the agency said that they will support
growth only in the medium term.
It, however, expects GDP growth to recover to 7.4 per cent in the second half
of the financial year, mainly on account of the base effect.
The Fitch group firm said that since major contributors to the economy's
investment pie are households (which include unorganised and unregistered
enterprises, 38.6 per cent) and private corporations (37.9 per cent), their
spendings hold the key for reviving broad-based investment activity in the
Of the other two demand-side growth drivers, the agency said that government
expenditure continues to be steady and is expected to grow at 10.6 per cent in
FY20 while exports are facing headwinds due to rising trade tensions and
weakening global GDP growth.