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India Ratings and Research (Ind-Ra), a Fitch Group company, has revised upwards India’s GDP growth forecast to 7.4 per cent for 2018-19 from 7.1 per cent projected earlier, a top official said.
The upward revision has been prompted by expected higher growth in industrial output, normal monsoon and better performance in the agriculture sector, Devendra Kumar Pant, Chief Economist and Senior Director (Public Finance), Ind-Ra, told BusinessLine .
On the expenditure side, the boost is expected to come from both private and government expenditure coupled with green shoots emerging in investment spending.
“After a gap, investments will help support growth this fiscal. This is unlike last few years, where growth was purely consumption led,” Pant said. He also said India Ratings sees the IIP growth recovery as “entrenched” and “sustainable”.
Pant pointed out that IIP, whose latest print (for February 2018) came in at 7.1 per cent, has shown growth recovery since November 2017, led by manufacturing.
“The February 2018 IIP growth at 7.1 per cent gives confidence that the industrial recovery is broadening. This is the first instance of four consecutive months of IIP growth of more than 7.1 percent in the 2011-12 base data,” Pant said.
For the first time (under the new base year of 2011-12), all the six use-based industries recorded four successive months (November 2017-February 2018) of positive growth, he said. “If you were to look at the use-based classification, it suggests that the recovery is becoming broad based,” he said. Meanwhile, Ind Ra in its newly launched research report ‘Arth Samvaad’, a monthly snapshot and analysis of key developments in Indian economy, has said that immediate pressure on the RBI to raise policy rates has subsided. This is because the recent data for both wholesale and retail inflation came in softer than anticipated.
“Therefore, the probability of a status quo on policy rates is quite high in 2018-19”, the report said.
CPI inflation is likely to be on an uptrend on a quarterly basis in the first half of 2018-19 due to low base in the first and second quarter of 2017-18. The fourth quarter CPI inflation at 4.59 per cent was the highest quarterly inflation in 2017-18,
The real cause of worry is elevated core inflation (more than 5.3 per cent) witnessed in the last five months.
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