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India’s economic upturn is “still intact” and the economy is on track to achieve 7.4 per cent GDP growth in 2018-19, BNP Paribas said in a new research report.
In its latest India macro monthly report, BNP Paribas has however noted that inflation continues to face upside risks and pencilled in two 25 basis points rate hike in second half this calendar year.
For the first time in four months, industrial production is likely to record its first sub 7 per cent year-on-year reading in March, according to Su Sian Lim, Senior Economist, APAC, who is the author of the research report. India is expected to maintain the tag as the fastest growing large economy, Su told BusinessLine here.
In February this year, the IIP had printed a reading of 7.1 per cent.
CAD
BNP Paribas has revised up its current account deficit (CAD) forecast to 2 per cent of GDP for 2018-19 as against earlier forecast of 1.4 per cent in March 2018.
For 2017-18, the CAD has been revised to 1.8 percent from level of 1.6 percent estimated earlier.
“In late March (2018), we raised our crude oil price projections and now expect Brent to reach $ 69 per barrel by the end of 2018 compared to earlier forecast of $ 62 per barrel. In terms of quarterly profile, we expect Brent to peak at $ 73 per barrel in Q3 of 2018”, Su said.
Fiscal deficit
On fiscal deficit, BNP Paribas is of the view that the Modi administration will still spend with restraint sufficient enough to keep the wary rating agencies at bay and that the 2018-19 fiscal deficit is unlikely to widen beyond 3.5 per cent of GDP in 2018-19. The Government looks set to miss its fiscal targets for 2017-18, according to the research report.
Data poised to slow
Following three to four months of robust data, BNP Paribas expects March numbers – and perhaps even throughout April-June 2018 — to highlight a slowdown. The PMI pointed to slower expansion in manufacturing in March, while exports and vehicle production also lost some steam in year-on-year terms, following strong double-digit prints in previous months.
Aiding the recovery in the industrial sector is an ongoing upturn in lending. Loans to industry continue to grow modestly; in February up for a fourth straight month at 1 percent year-on-year.
In (positive) contrast to previous upturns, this upturn has been driven by higher lending not only to large firms, but also to micro and small firms, suggesting a broad based recovery.
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