GDP growth in FY19 to touch 7.2%, says report

GDP growth in FY19 to touch 7.2%, says report

India's economic growth is expected to continue with a "shallow recovery" next year, and is likely to inch up to 7.2% in 2018-19, from an estimated 6.5% in the current fiscal, says a report.

According to global brokerage Bank of America Merill Lynch (BofA-ML), economic recovery will continue to be driven by consumption, supported by a pre-poll step-up in public spend rather than investment, given the persistence of surplus capacity and tight 3.2% of GDP fiscal deficit target.

"We expect India to continue to see a shallow recovery in 2018. Growth will likely inch up to 7.2% in 2018-19 (and 7.6% in 2019-20), from 6.5% in 2017-18," the report said, adding, "India's growth, at 5.5-6% in old series, will likely continue to remain below the 7% trend. This is in contrast to many economies, including the US, which are above potential."

Noting that consumption, not investment, would be the key driver for economic growth, BofA-ML said a possible La Nina and farm loan waivers (doubling to $40 billion by the summer 2019 polls) could support rural demand, while lower lending rates and a possible hike in the income tax exemption limit will "likely buttress urban demand".

Meanwhile, the global brokerage said that it does not see a turn-up in capex cycle for the next two years. "We do not see this in the foreseeable future. While we recognise that markets will price in the event ahead, we do not a case for a turn in the capex cycle in FY'20 either," BofA-ML said.

"It is because of excess capacity, we do not see any turn around in investment. Public investment is also constrained by a strict 3.2% of GDP centre's fiscal deficit target in FY18-19," it added.

Liked the story?

  • 0

    Happy
  • 0

    Amused
  • 0

    Sad
  • 0

    Frustrated
  • 0

    Angry