Crisil retains 7.6% growth estimate for FY19

Attributing the continuing slowdown to the impacts of the demonetisation, GST implementation and weakness in agriculture, rating agency Crisil has maintained its FY19 growth estimate at 7.6% on the low base.

"The pace of economic growth has slowed down this fiscal year, which is attributable mostly to the lingering impact of the demonetisation, transitory disruptions caused by the implementation of the goods and services tax (GST), and weak agricultural growth," it said in a note on Monday.

The note comes days after the Central Statistical Office came out with its advanced estimates of growth for FY18 suggesting a slowdown in GDP expansion to 6.5%, the lowest in four years. The agency, however, held on to its FY19 growth estimate of 7.6% primarily on the low base of FY18.

"Given the low base and the expected waning of the GST impacts going ahead, we retain our forecast of 7.6% real GDP growth in fiscal 2019, with private consumption leading the recovery," it said. Private consumption will grow 6.3% in FY18, over a high base of an 8.7% growth in FY17, and will remain the biggest contributor to GDP at 55.7%, the report said.

In FY19 as well, growth will continue to be consumption-led as inflation will under control and interest rates are expected to be soft, it said, adding a rise in government employees' salaries with the implementation of the seventh pay panel recommendations will also help. The rural focused-government spending will also be of help, it added. The Rs 2.11 lakh crore recapitalisation programme will ensure that the state-run banks are well positioned to support the growth, it said. Support to growth will also come from the external sector where the global recovery should help exports, which had faced some headwinds after the GST implementation, it said.