With most indicators pointing to weak domestic demand and tepid investment climate, India's gross domestic product (GDP) is expected to slip further in the April-June quarter of current fiscal. Ahead of the official release of GDP numbers, most research firms have predicted muted growth in the previous quarter and have revised downward their forecast for FY20.
Cutting down FY20 GDP growth to 6.7 percent (six-year low) from its earlier forecast of 7.3 percent, India Ratings and Research (Ind-Ra) on August 28 said that the current fiscal would be the third consecutive year of subdued growth. It attributed the lackluster performance primarily to a slowdown in consumer demand, delayed monsoon, the decline in manufacturing and rising global trade tensions affecting exports.
"Even on a quarterly basis, 1QFY20 is expected to be the fifth consecutive quarter of declining GDP growth as Ind-Ra expects it to come in at 5.7 percent," the Fitch Group firm said in its report.
Other firms too have presented an equally negative outlook of the economy. Moody's Investors Service sees India growing at 6.4 percent in FY20 as domestic and external headwinds would persist over the year.
A Goldman Sachs report a few days back said that the current slowdown has lasted for 18 months as of June 2019 -- making it the longest episode since 2006. It further said that policymakers have acted to mitigate the current slowdown but policy responses seem less aggressive compared with earlier episodes, with fiscal restraint so far.
The government had on August 23 announced a slew of measures to boost the economy and lift investor sentiment. Among the measures, steps included roll-back of enhanced surcharge on foreign portfolio investment (FPIs) and upfront transfer of Rs 70,000 crore for recapitalization of public sector banks to give them firepower for lending.
Most lead indicators such as car sales, core sector data, jobs, and services growth suggest the Indian economy is in the grip of a slowdown. It is increasingly becoming a challenging task for the government to put the economy in high growth orbit to realize its potential of 8 percent annual growth on a sustained basis.
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