India Ratings and Research (Ind-Ra) has revised down its FY19 economic growth forecast to 7.2% from 7.4% earlier.
It cited the headwinds emanating from elevated global crude oil prices and the government’s decision to fix the minimum support prices of all kharif crops at 1.5x of the production cost as the reason for the downward revision.
Ind-Ra also pointed to other headwinds lurking on the horizon such as the rising trade protectionism and depreciating rupee.
“ There are no visible signs of the abatement of the non-performing assets of the banking sector,’’ it further pointed out.
The rating agency expected the private final consumption expenditure to grow 7.6% in FY19 compared to 6.6% in FY18. The thrust for growth, it said, would come from the waning impact of demonetisation, rise in rural consumption due to two consecutive favourable monsoons and reduction in the goods and services tax rate on several items.
“However, investment expenditure, as measured by gross fixed capital formation, is unlikely to significantly improve over FY18. It is expected to grow at 8.0% in FY19,’’ It said.
Ind-Ra felt that the government capex alone would not be sufficient to revive the capital expenditure (capex) cycle, as its share in the total capex of the economy was only 11.1% during FY12-FY17.
