Indian gross domestic product (GDP) growth is likely to fasten to 7.2 per cent in 2018-19 and to 7.3 per cent in 2019-20, according to CRISIL, which recently projected a substantial rise in RETAIL inflation to 4.5 per cent in 2019-20. The 7.3 per cent growth assessment assumes normal rainfall, lower oil prices and a stable political outcome in general elections.
With the government likely to stick to fiscal consolidation, growth would pick up gradually. However, a change in the growth mix is anticipated, with private sector likely to take over the baton from the government, Crisil said in a report.
“The economy has so far fired mainly on the public investment cylinder, and is estimated to grow at 7.2 per cent. Private consumption has disappointed. Exports, however, have performed well, presenting a buoy to the manufacturing sector,” it said. Private consumption growth is projected to pick up due to softer interest rates and improved farm realisations as food inflation moves up.
“With continuously improving capacity utilisation and the end of the de-leveraging phase for corporates, conditions are ripe for a revival of private corporate investments. A stable political outcome will facilitate this,” the report said.
Downside risks, however, exist, especially related to assumptions on rainfall, oil prices, and political stability. The US National Oceanic Atmospheric Administration foresees an El Niño event in 2019, and if that happens, it would compound the rural distress currently being felt on account of dropping farmer incomes.
“If the general elections this year were to yield a fractured mandate and derail/delay the process of reforms, the implications on sentiments, investments and growth could be adverse,” the report said. The organisation pointed to a possible reversal of benign food inflation in 2019-20, in the eventuality of the monsoon failing and the related effect this would have on food prices.