“India Ratings and Research (Ind-Ra) expects gross domestic product (GDP) to grow at 5.5% year-on-year in FY21, however, the downside risks persist,” the agency said in a statement on Wednesday.
The slowdown, in the agency’s view, is a combination of several factors. These are an abrupt and significant fall in lending by non-banking financial companies close on the heels of a slowdown in bank lending, reduced income growth of households coupled with a fall in savings and higher leverage, and inability of the dispute resolution/judicial systems to quickly unlock the stuck capital.
“Although some improvement in FY21 is expected, these risks are going to persist,”
As a result, the Indian economy is stuck in a phase of low consumption as well as low investment demand.
It expects the shortfall in the tax plus non-tax revenue to result in the fiscal deficit slipping to 3.6% of GDP (budgeted 3.3%) in FY20, even after accounting for the surplus transferred by the RBI.
Ind-Ra believes a strong policy push coupled with some heavy lifting (even if this requires using the escape clause as suggested by the FRBM Review Committee headed by N K Singh) by the government is required to revive the domestic demand cycle and catapult the economy back into a high growth phase.
The agency expects retail and wholesale inflation to average 3.9% and 1.3%, respectively, in FY21 (FY20: 4.4% and 1.4%). Food and crude oil prices are the key drivers of inflation in India.
External environment continues to be challenging for exports due to the trade friction and protectionist policy pursued by many developed economies.
“As a result, India’s exports of goods and services are likely to witness negative growth of 2% in FY20,” India Ratings said.
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10 Comments on this Story
manu405 days ago
raj...that's true....if any economists voice there concern....like if gov had come to help nbfc way back today everything would have been fine.....like yashodhan comment..... economists will face anti India tag now if they tell anything.....we are going in dangerous direction
Raj Tillan406 days ago
rating agencies have been made to fall in line like Malaysia .. only optimistic narration any negative will attract sedition and treason charges
Caba San406 days ago
India is already in RECESSION as per leading Economists. GDP=4.5 is Govt doctored Number, copy cat by IMF fat salaried employees....