Global ratings agency, CRISIL has lowered India’s Gross Domestic Product (GDP) growth forecast for 2017-18 to 7 percent from 7.4 percent forecasted earlier. The forecast has been scaled down as it believes GST- related disruptions will continue to impact the economy for a few more quarters because there are uncertainties around the possibility of changes to the given tax structure and as businesses adjust to this new regime.
In April-June quarter of FY18, economic growth unexpectedly slowed to 5.7 percent, the slowest pace in three years and the country lost the tag of the world’s fastest-growing large economy to China. Therefore, the report pointed out that the current year will see some more headwinds in the form of GST related disruptions, even as the economy tries to recover from the impact of demonitisation announced last November. It noted that the 7 percent growth forecast implies a GDP growth of 7.4 per cent in the remaining three-quarters and is still higher than the reading by most other analysts which are all under 7 percent.
As per the report, the economy can only grind its way up in an environment of subdued global growth and weak domestic investments because the benefits of low commodity prices till last year may not be available this year and hence the bottom line may remain under pressure. On the external front, it felt that though global growth prospects appear somewhat better relative to 2016, factors like the falling trade growth, rising geopolitical risks and uncertainties surrounding the pace of normalisation of monetary policy in the advanced nations, along with rupee appreciation would mean contribution of exports to domestic economic growth would be limited. Besides, it cautioned that manufacturing growth could slow down to 7.6 percent in 2017-18 from 7.9 percent last fiscal year. However, it said that agricultural growth is expected to be buoyant.