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23 Dec, 17
23 Dec, 17

Another day, another rating agency: Indian GDP’s grim prospects highlighted by another source

Another rating agency comes out with a dismal projection of the Indian GDP.

By Qrius

By Devanshee Dave

In October, the rating agency Fitch cut down the economic forecast of India for the financial year 2017-18 to 6.9 percent. In December this year, Fitch cut it down further to 6.7 percent. Now, following the same trend, the rating agency Crisil has also cut down the projection of Indian GDP to 6.8 percent from the previous estimation of 7.0 percent.

The projections

This Friday, rating agency Crisil announced its estimations for the Indian economy for the period 2017-18. Previously, Crisil had projected the growth for the financial year at 7 percent and for 2018-19, it was projected to be at 7.8 percent. However, the rates have been revised now. As per the agency, the expected growth for Indian GDP for 2017-18 is going to be at 6.8 percent—down by 0.2 base points—and for 2018-19, it is expected to be at 7.6 percent, down from 7.8 percent.

As per the Chief Economist of Crisil, DK Joshi, “CRISIL’s estimate of 6.8 percent growth for 2017-18 requires the GDP to expand by 7.5 percent in the second half of the year after having expanded by 6 percent in the first half. As much as 7.5 percent growth in the second half could come due to the base effect.”

Consumer price index

Along with this, Crisil also announced the rate of consumer price index (CPI) to be at 4.0 percent for the financial year 2017-18 and for 2018-19, it is expected to increase to 4.6 percent. It is noted that the rate of CPI stated by Crisil is higher than that of the RBI’s estimation of 3.7 percent. For the coming two quarters, the monetary policy committee of RBI has also revised the rate of inflation to 4.3-4.7 percent, from the previous 4.2-4.6 percent.

The slowdown

The Indian Gross Domestic Product has been quite dramatic this year, facing several ups and downs. The main reason behind the slowdown in the current financial year is, of course, demonetisation. The GDP for the period of September to November 2016 expanded by 6.9 percent, and for the period of December to March, it was 6.1 percent. Moreover, for the July to September quarter this year, the GDP sunk as low as 5.1 percent due to the effects of demonetisation and GST. As per Crisil, even with the global economy recovering, India wasn’t able to get any benefits due to the tax overhaul. However, with time, India was able to recover the rates to 6.3 percent. Again, as per Crisil, for the financial year 2017-18, the Indian farming sector is expected to grow by 3.0 percent.

The road to recovery?

Many rating agencies like Fitch and Crisil have lowered their projection for the growth of the Indian economy but amidst this, the International Monetary Fund (IMF) has shown a positive sign for India. It has stated that the economic growth of the emerging economy is likely to increase up to 4.6 percent, up from 4.3 percent. Now that India has digested the pills of demonetisation and GST, it will receive the benefits of this, assuredly.


Featured Image Source: Pixabay


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