S&P lowers India’s growth forecast to 5.2 pc in 2020

Source: The Economic Times, Mar 18, 2020

NEW DELHI: S&P Global Ratings on Wednesday lowered India’s economic growth forecast to 5.2 per cent for 2020, saying the global economy is entering a recession amid the coronavirus pandemic.

The agency had earlier projected a growth rate of 5.7 per cent during the 2020 calendar.

Asia-Pacific economic growth in 2020 will be more than halve to less than 3 per cent as the “global economy enters a recession”, S&P said in a statement.

An enormous first-quarter shock in China, shutdowns across the US and Europe, and local virus transmission guarantees a deep recession across Asia-Pacific, said Shaun Roache, chief Asia-Pacific economist at S&P Global Ratings.

“We lower our forecasts for China, India, and Japan for 2020 to 2.9 per cent, 5.2 per cent and -1.2 per cent (from 4.8 per cent, 5.7 per cent, and -0.4 per cent previously),” S&P said.
On Tuesday, Moody’s Investors Service had lowered India’s economic growth forecast for 2020 to 5.3 per cent (from 5.4 per cent), in the wake of the coronavirus impact on the economy.

UBS cuts India GDP growth forecast to 5.1 pc for FY21

Source: The Economic Times, Mar 12, 2020

MUMBAI: Swiss brokerage UBS on Thursday sharply cut its 2020-21 GDP growth forecast for India to 5.1 per cent on fears around the coronavirus outbreak and also weak credit growth domestically.

The brokerage also cut its FY20 growth estimate marginally to 4.8 per cent.

The GDP growth is set to slip to a decadal low of 5 per cent for FY20 as per official estimates and hopes of a revival are being pinned on the next fiscal.

The brokerage’s economist Tanvee Gupta Jain said even though there are only over 50 positive coronavirus cases in India so far, the fear and uncertainty over its impact could worsen near-term consumer sentiment and hit domestic demand.

Additionally, there will be sectoral impact on production due to shortages of inputs in electronics, pharma and automobile sectors or reduced external demand on slowing global growth, which would also have a bearing on India’s growth outlook, she explained.

Apart from the coronavirus-related measures, the weak credit impulse domestically could constrain growth for the next two quarters, it said.
“We now expect India’s real GDP growth to remain weak at 5.1 per cent YoY in FY21 (previously 5.6 per cent) compared with 4.8 per cent YoY (previously 4.9 per cent) in FY20,” it said, adding the growth rate will continue to be under potential in FY22, when it is expected to touch 6 per cent.

The brokerage said it has already taken into account the benefits of the oil prices decline while making its estimate.

Courtesy the lower growth, India will continue to be constrained fiscally even in FY21, it said, expecting the government to breach the budgeted FY21 fiscal deficit target.

There will be a 0.30 per cent slippage on the crucial number during the next fiscal over the 3.5 per cent aspiration, it said.

GDP growth in Q3 likely to stay flat at 4.5 per cent: Economists

Source: The Economic Times, Feb 27, 2020

NEW DELHI: India’s economy is likely to have grown at the same pace as in the third quarter at 4.5%, most independent economists said, though others expect growth to be a tad faster, based on a slight pickup in agriculture and government spending.

“Our composite leading indicator (index of 33 major leading indicators) suggests that gross domestic product growth to remain flat at 4.5% as in Q3 of FY20,” said Soumya Kanti Ghosh, group chief economic adviser, State Bank of India.

India’s economic growth slipped to a 26-quarter low of 4.5% in July-September from 5% in the first quarter.

The statistics office lowered the FY19 GDP growth rate to 6.1% from the provisional estimate of 6.8% and has forecast 5% growth in FY20, its slowest pace in 11 years. The Economic Survey 2020 sees a recovery to 6-6.5% in FY21. “We were earlier anticipating a downward revision in FY20 growth rate from 5% to 4.6%,” Ghosh said.

This downward revision, as per Ghosh, will have statistical benefits as it could push up FY20 GDP to 4.7%. “There is not much improvement. We have retained our full year GDP target at 4.7%,” said Upasna Bhardwaj, economist at Kotak Mahindra Bank.

Manufacturing activity is likely to remain pressured and unlikely to better the 6.4% growth in the corresponding period the year ago. Falling growth seen in sales of commercial vehicles, railway freight traffic and cargo handled by civil aviation has also contributed to the projection being significantly lower. “There is no joy in the GDP story. Consumption could be slightly better because of PM-KISAN but there is no systematic improvement anywhere,” said IDFC First Bank chief economist Indranil Pan.

The Reserve Bank of India has cut policy rates by 135 bps since February, 2019, and the government reduced corporate rate tax to 22% in order to attract investment and boost growth.

Despite these steps, indicators available till the quarter ended December, 2019, are not particularly robust, said Madan Sabnavis, chief economist at CARE Ratings.

“The sharp decline in October and November seems to have been reversed in December,” said Devendra Kumar Pant, chief economist at India Ratings.

RBI sees GDP to expand at 6 per cent in FY21

Source: The Economic Times, Feb 06, 2019

The Reserve Bank of India on Thursday projected the economy to expand by 6 per cent during the next financial year, pegging it at the lower end of the GDP growth estimate of the Economic Survey.

The survey, tabled in Parliament last month, estimated the GDP growth during FY21 at 6-6.5 per cent.

After three-day deliberations, the Monetary Policy Committee (MPC), headed by Reserve Bank of India (RBI) Governor Shaktikanta Das, observed that the economy continues to be weak and the output gap remains negative.

Real GDP growth for 2019-20 was projected at 5 per cent in the December 2019 policy.

The central bank said that for 2020-21, the growth outlook will be influenced by several factors, including level of private consumption, and external factors.

It said private consumption, particularly in rural areas, is expected to recover on the back of improved Rabi crop prospects. The recent rise in food prices has shifted the terms of trade in favour of agriculture, which will support rural incomes.
The easing of global trade uncertainties should encourage exports and spur investment activity, it said.

“The breakout of the coronavirus may, however, impact tourist arrivals and global trade,” it added.

Also, the rationalisation of personal income tax rates in the Union Budget 2020-21 should support domestic demand along with measures to boost rural and infrastructure spending.

Taking into consideration different factors, RBI said “GDP growth for 2020-21 is projected at 6.0 per cent – in the range of 5.5-6.0 per cent in H1 and 6.2 per cent in Q3,”

The government has said the Union Budget presented by Finance Minister Nirmala Sitharaman has a host of steps to spur economic growth, which is estimated to have slowed to a decade-low of 5 per cent in the current fiscal.

Fitch forecasts India’s FY’21 GDP growth at 5.6 per cent

Source: The Hindu Business Line, Feb 03, 2019

New Delhi: Fitch Ratings on Monday said India is expected to clock a GDP growth of 5.6 per cent in the next financial year, lower than the projection made by the government’s Economic Survey, as Budget 2020 has not “materially altered” its view on the country’s growth outlook.

The Economic Survey, released a day before Finance Minister Nirmala Sitharaman presented Union Budget for 2020-21 on February 1, had projected a GDP growth of 6-6.5 per cent, up from 5 per cent estimate for 2019-20.

Fiscal slippage

“The fiscal slippage announced in the government’s new FY21 budget is modest relative to its previous targets, and is consistent with our expectations when we affirmed India’s ‘BBB-’ rating with a stable outlook last December, given slowing growth momentum,” said Thomas Rookmaaker, Director and Primary Sovereign Analyst for India, Fitch Ratings.

Sitharaman’s Budget missed deficit target for the third year in a row, pushing shortfall to 3.8 per cent of GDP in the current fiscal as compared to 3.3 per cent previously planned.

The fiscal deficit target for the coming fiscal year starting April 1, has been fixed at 3.5 per cent.

“The new budget targets imply some further postponement of fiscal consolidation, in line with the government’s ambivalent approach to consolidation of the past few years when deficit out-turns have typically exceeded budget targets,” Fitch said projecting general government debt to remain close to 70 per cent of GDP through FY22.

India’s high public debt relative to peers is a rating weakness, it said.

“The budget does not materially alter our view on India’s economic growth outlook, which we forecast to pick up to 5.6 per cent in FY21 from 4.6 per cent in FY20,” it said.

The report further noted that Budget contains some measures which may support GDP growth in the medium-term, including reduced individual income tax rates, some easing of restrictions on foreign portfolio inflows, continued focus on public infrastructure spending, and schemes of which the details remain to be announced to encourage manufacturing in the electronics and textiles sectors.

The rating agency said the assumptions in the budget, including nominal growth of 10 per cent and a rise in revenues by 9.2 per cent were “broadly credible” although there were risks to the downside.

“In particular, reductions in the corporate tax rate, as previously announced, and new cuts in income tax rates are likely, in our view, to cause tax revenues to fall in the short run, before any potential medium-term benefits materialise; the divestment target appears optimistic, at over three times the estimated realisation in FY20,” it said.

Indian economic growth plunged to 11-year low in the July-September quarter when it clocked 4.5 per cent expansion. “Greater fiscal transparency around off-budget financing is welcome, as the new budget now explicitly recognises borrowing from the National Small Savings Fund of 0.8 per cent of GDP in both FY20 and FY21, e g to finance food subsidies, although this is not incorporated in the headline figure (which would be 4.6 per cent of GDP in FY20 instead of 3.8 per cent),” Fitch said.

India Ratings pegs FY21 GDP at 5.5%, warns of downside risks

Source: The Economic Times, Jan 22, 2019

New Delhi: Ratings agency India Ratings and Research has pegged India’s Gross Domestic Product (GDP) growth for 2020-21 at 5.5%, above the 5% growth that India’s statistics office expects for 2019-20.

“India Ratings and Research (Ind-Ra) expects gross domestic product (GDP) to grow at 5.5% year-on-year in FY21, however, the downside risks persist,” the agency said in a statement on Wednesday.

The slowdown, in the agency’s view, is a combination of several factors. These are an abrupt and significant fall in lending by non-banking financial companies close on the heels of a slowdown in bank lending, reduced income growth of households coupled with a fall in savings and higher leverage, and inability of the dispute resolution/judicial systems to quickly unlock the stuck capital.

“Although some improvement in FY21 is expected, these risks are going to persist,”

As a result, the Indian economy is stuck in a phase of low consumption as well as low investment demand.

It expects the shortfall in the tax plus non-tax revenue to result in the fiscal deficit slipping to 3.6% of GDP (budgeted 3.3%) in FY20, even after accounting for the surplus transferred by the RBI.
Ind-Ra believes a strong policy push coupled with some heavy lifting (even if this requires using the escape clause as suggested by the FRBM Review Committee headed by N K Singh) by the government is required to revive the domestic demand cycle and catapult the economy back into a high growth phase.

The agency expects retail and wholesale inflation to average 3.9% and 1.3%, respectively, in FY21 (FY20: 4.4% and 1.4%). Food and crude oil prices are the key drivers of inflation in India.

External environment continues to be challenging for exports due to the trade friction and protectionist policy pursued by many developed economies.

“As a result, India’s exports of goods and services are likely to witness negative growth of 2% in FY20,” India Ratings said.

UN revises growth forecast to 5 per cent for India in current fiscal

Source: The Economic Times, Jan 17, 2019

The United Nations (UN) has revised its forecast for India’s growth in the current fiscal to 5% on Friday, down from 5.7% it had mentioned in its World Economic Situation and Prospects (WESP) 2020 report released on Thursday.

Its estimate for FY21 was also further downgraded to 5.8%-5.9% from 6.6% in the report, said Nagesh Kumar, head of the UN economic and social commission for Asia and the Pacific, while presenting the report in Delhi.

Since the report was finalised in October it did not take into account the second quarter results and hence the outlook has been revised, Kumar said.

This comes as a further downgrade from last year’s WESP 2019 report which had pegged India’s gross domestic product (GDP) growth at 7.6% in FY20 and 7.4% for the next fiscal.

According to the report, one in five countries will see its per capita income stagnate or decline this year, however, India will see its per capita income rise at above the 4% level in 2020.

The annual report has forecast global growth to improve to 2.5% from 2.3% last year if downside risks such as trade war and geopolitical tensions do not flare up.
For the South Asia region, the report estimates growth to pick up to 5.1% in 2020 after a decade-low 3.3% last year.

Although India is the main economy in the region with a 70% weightage in the UN’s calculations, Bangladesh looks to be pulling the average up since its economy is the fastest growing in the region at 8.1% this fiscal, as per the report.

In terms of policy recommendations for a slowing global economy, the report calls for an end to the reliance on monetary policy and advocated for more fiscal measures.

According to Kumar, the focus on monetary policy easing is enabling excess liquidity to flow into stock markets rather than productive sectors of economies. This creates an unhealthy situation in which stock markets are bullish while economies are slowing down.

“At this moment, the single biggest priority for the finance minister should be to revive growth. We must use all the available fiscal space to boost growth. Although fiscal consolidation is important, it can be a medium-term focus,” he said about India.