Ratings agency Crisil on Monday cut its FY14 growth forecast for India to six per cent from the earlier 6.4 per cent citing a variety of reasons, including the high lending rates, weaker pick-up in consumption and issues around mining and project clearances.
“We have cut the GDP growth forecast for FY14 to six from 6.4 per cent expected earlier,” Crisil Research said in a note issued in Mumbai.
In the Budget, Finance Minister P Chidambaram had said the government was targeting a growth of 6.1-6.7 per cent for the current fiscal.
Crisil said a weaker-than-expected pick-up in household consumption being witnessed at present could begin to act as a drag on manufacturing.
The rating agency has cited “downward rigidity”, wherein the repo rate cuts by the Reserve Bank are not getting passed in lending rates, as among the factors for the downward revision.
“Although we continue to believe that growth in FY14 will be greater than last year’s 5 per cent, the recovery is fragile and hinges critically on a normal monsoon,” the report said.
Issues around policy-making, especially in mining and the “lack of speedy project clearances, which continue to hurt manufacturing, infrastructure and investment activity” also topped Crisil’s list of factors that it felt will hurt growth.
Additionally, the lowering of the European GDP forecast to -0.5 per cent from the earlier -0.1 per cent by some estimates may have an adverse impact on the domestic growth, the report said.
Economic growth in FY13 is expected to come down to a decade low of 5 per cent, according to estimates.
International rating agencies like Standard & Poor’s (Crisil’s parent company) and Fitch had last year threatened to downgrade the country’s rating to junk on lower growth, troubles on the policy front and the high fiscal deficit and current account deficit. The CAD had hit a historic high of 6.7 per cent in the third quarter of last fiscal.