Slower global growth, below normal monsoon and weaker corporate earnings will pull down India’s economic growth rate below 7 per cent this fiscal, rating agency Crisil said. The agency has reduced its fiscal 2020 forecast by 20 basis points to 6.9 per cent . One basis point is 0.01 percentage point.
More importantly there are also no immediate signs of growth reclaiming its 14-year average of 7 per cent as monetary policy is inadequate to stimulate growth while fiscal constraints mean that public spending cannot step in to pull growth above 7 per cent , Crisil said in a report titled ‘Uphill Trek.’
“Given the fiscal constraints, public spending is unlikely to have the heft to pull growth above 7 per cent . And some of the recent, and much-needed, reforms would pay off only over the medium term. There would, therefore, be some near-term onus on monetary policy to stimulate growth. But how effective that can be is the big question. So fingers crossed for now,” Crisil, an arm of global rating agency Standard & Poors said.
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Crisil’s cut comes days after the IMF revised India’s growth by 30 basis points each in calendar year 2019 and 2020 to 7 per cent and 7.2 per cent respectively.
Crisil expects the slowdown to be more pronounced in the first half of the fiscal with some help from interest rate cuts helping consumption in the second half. However, with policy action attuned to consumption than investment demand, means consumption could be the first to turn the tide.
Source: Economic Times
