Good monsoon rains could push up economic growth to 7.8 per cent this fiscal, India Ratings said on Tuesday but warned that a slow recovery in investments is hindering faster growth.
“The upward revision has been prompted by the progress of monsoon and the sowing of kharif crops so far,” it said in its Economic Outlook for 2016-17.
It had earlier pegged GDP growth at 7.7 per cent this fiscal.
Finance Minister Arun Jaitley had expressed hope that the economy could grow at eight per cent this fiscal on the back of good monsoon rains.
Meanwhile, India Ratings also expects a pick-up in consumption demand, which is likely to grow at 8.4 per cent this fiscal, on the basis of favourable monsoon as well as the Seventh Central Pay Commission payout.
However, industrial growth at 7.2 per cent in 2016-17 will still be lower than the 7.4 per cent witnessed as against last fiscal.
“The key factor that is holding the acceleration of industrial growth is investment recovery,” it said, noting that though the government has taken several initiatives such as to encourage manufacturing and solve power sector problems, “it has failed to rekindle the animal spirit” in the economy.
Meanwhile, it pegged the wholesale price index based inflation at 3.3 per cent and consumer price index based inflation at five per cent this fiscal.
Despite the slightly rusty fiscal arithmetic, it said the Centre will also achieve its fiscal deficit target of 3.5 per cent of the GDP this fiscal.