India Ratings projects economic growth at 7.1% next fiscal

India Ratings projects economic growth at 7.1% next fiscal

India Ratings projects economic growth at 7.1% next fiscal

India Ratings and Research today projected the country's economic growth to improve to 7.1 percent next fiscal from 6.5 percent this year, buoyed by robust consumption demand.

In its outlook for 2018-19, the agency said there will be a gradual pick up in growth momentum owing to structural reforms like GST and Insolvency and Bankruptcy Code (IBC) in place.

"While the implementation of GST is likely to benefit the economy over the medium to long-term, the same cannot be said about the impact of demonetisation," India Ratings & Research (Ind-Ra), a subsidiary of Fitch Ratings, said.

Ind-Ra expects gross domestic product (GDP) to grow 7.1 percent year-on-year in 2018-19, it said.

The projection is a tad lower than 7.4 percent growth estimated by Asian Development Bank (ADB) and International Monetary Fund (IMF) for next fiscal.

Ind-Ra said but for demonetisation and Goods and Services Tax (GST) implementation, growth would not have decelerated to 7.1 percent in 2016-17 and 6.5 percent in 2017-18.

With the global crude prices firming up, Ind-Ra expects retail and wholesale inflation to come in at 4.6 percent and 4.4 percent, respectively in 2018-19, indicating an end to the current rate cut cycle.

There is still some fuzziness with respect to the intensity and the level of its future trajectory, it said, adding that the RBI "will remain in a pause mode for an extended period of time".

The agency said it expects the fiscal deficit in 2017-18 to come in at 3.5 percent, overshooting the budgeted estimate of 3.2 percent.

"Despite 2018-19 being a pre-election year, Ind-Ra does not expect the Union Budget to be a populist budget. However, it expects some expenditure reallocation with an increased focus on the rural and agriculture sectors," it said.

The agency expects the fiscal deficit in 2018-19 to be at 3.2 percent, higher than 3 percent stated in the medium-term fiscal policy statement.

A mix of global and domestic factors will keep the Indian rupee range bound at average Rs 66.06/USD in 2018-19, it said.