Credit rating agency, Crisil in its latest annual India outlook report has said that the Indian economy is likely to see a mild recovery due to pent-up consumption demand after demonetization and expects the GDP growth to rise to 7.4 per cent, up 30 basis points in FY18. The agency also said that the economy is witnessing a series of resets in growth expectations, ecosystems and in industries which is likely to have more long-term benefits than short term. It said that ample headroom in capacity utilization, stretched balance sheets, and just a moderate pick-up in demand will mean revival in the private sector investment cycle would get deferred to fiscal 2019.
The rating agency further said that the decline in interest rates over the past two years is salutary, it won't be enough to revive the investment cycle till other factors, such as demand and deleveraging, also turn conducive and therefore the government and public sector will have to continue to do the heavy-lifting next fiscal as well, especially on the infrastructure side, to ensure growth stays the course. In banking sector, the agency sees lower slippages of NPAs. Besides, it sees signs of turnaround in some commodity-linked sectors (especially metals) and in mid- sized EPC segment.
In outlook series report called ‘Colors of Growth’, Crisil however stated that the credit quality of corporates is showing signs of gradual recovery driven by firm commodity prices, stable macros and lower interest costs, which will help to boost their revenue growth to a five-year high of 8-9 per cent in fiscal 2018, while operating profit margins are likely to remain range-bound as higher commodity prices will take a toll on end-user sectors.