Rising oil prices, liquidity squeeze at banks will hit economic growth in FY20: CARE

Our Bureau Mumbai | Updated on March 12, 2019 Published on March 12, 2019

Most respondents in a CARE Ratings Survey on ‘Economic Perspective for 2019’ feel that the National Democratic Alliance (NDA) government will come back to power in 2019, either with a majority or in the form of a coalition with new allies.

According to the survey, in which 285 participants responded from various sectors such as agriculture and allied, manufacturing, financial services, banking, infrastructure, real estate and services, nearly 47 per cent of the participants expect the existing NDA government to come back to power on its own, while 34 per cent feel they may not get absolute majority.

When those who said the NDA government may not get an absolute majority were further asked if there would be a coalition government with new allies, 84 per cent of the respondents agreed on this, the credit rating agency said in a report.

“Nearly one-third of the respondents feel that implementation of GST (Goods and Services Tax) and resolution of banking system NPAs (non-performing assets) have been unsatisfactory, while ‘Housing for all’, ‘Power for all’ and ‘financial inclusion’ have been satisfactory. Therefore, reaching out to the poor has been effective unlike the more complex issues such as GST and NPA resolution,” the survey said.

The survey observed that GST implementation has been satisfactory as per 42 per cent of the respondents, though 30 per cent are not satisfied. As for social-oriented schemes, the response has been very positive with more than two-third being in favour, it added.

The survey said there is a divided opinion with respect to resolution of NPAs in the banking system, with 38 per cent opining that implementation of policies is satisfactory, with 36 per cent feeling it is unsatisfactory.

Hindrances to growth

According to the survey, economic growth in the coming fiscal year could be hindered on account of slowdown in global economy, liquidity pressures in the banking system, elections and rising crude oil prices.

It elaborated: “More than 40 per cent of the participants think that liquidity pressures in the banking system, slowdown in global growth and elections would be risks for economic growth of India in 2019-20. More than 36 per cent indicate that rising crude oil prices and fiscal slippages might pose another threat for high economic growth. As per respondents, other risks pertain to employment generation (28 per cent), trade wars (23 per cent) and currency volatility (15 per cent).”

“Forty per cent expect GDP growth for 2019-20 at around 7-7.5 per cent, while 29 per cent foresee it to be somewhere between 6.5-7 per cent, and 23 per cent people suggest that it would be above 7.5 per cent. On the whole, a little over 75 per cent expect it to be below 7.5 per cent.”

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Published on March 12, 2019
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