JOIN USSingaporean lender DBS has revised down its fiscal 2015 GDP growth forecast for India on slower investment and manufacturing, but said the country is entering a 'sweet spot' over the next two or three years to lift the potential growth rate back to 7 per cent.
According to the global financial services major, while the recovery process is proceeding, there has been slower progress in terms of investments and manufacturing in the first half of the current financial year.
Slower investment and manufacturing is expected to impact second half performance as well, which "accompanied by lower government spending and weaker net exports, put our fiscal 2015 and fiscal 2016 forecast at risk," DBS said in a research note.
The GDP growth in the second quarter of this fiscal slowed marginally to 5.3 per cent, lower than the 5.7 per cent target in first quarter.
"With first half GDP growth slower than our base case and dampening forces in the second half, we temper our fiscal 2015 GDP estimate to 5.6 per cent from 6.1 per cent previously," DBS said in a research note, adding that for fiscal 2016, there is likely to be a slight acceleration to 6.1 per cent.
The decline in second quarter GDP is mainly on account of subdued performance of agriculture sector as its growth rate slipped to 3.2 per cent in second quarter from 5 per cent in the corresponding period last fiscal. Similarly, manufacturing sector growth rate declined to 0.1 per cent during July-September quarter from 1.3 per cent a year ago.
DBS has revised fiscal 2016 GDP forecast to 6.1 per cent from 6.5 per cent previously.
The report, however, said that "nonetheless, the economy is in the cusp of a cyclical recovery, with a structural boost over the next two or three years to lift potential growth back to 7 per cent."
Growth to improve
India’s economic growth is expected to improve to 6.3 per cent in 2016 with the country leading economic recovery in South Asia, according to a United Nations report.
The UN World Economic Situation and Prospects 2015 (WESP) report, launched here on Wednesday, also said that India is likely to make progress in implementing economic policy reforms and help provide support to business and consumer confidence.
It said that global economic growth is forecast to continue increasing over the next two years, despite legacies from the financial crisis continuing to weigh on growth.