Going in line with other predictions, the credit rating agency India Ratings has said that India’s GDP growth estimate for the ongoing financial year 2017-18 is likely to come down to 6.7 per cent from 7.4 per cent earlier, as the combined effect of demonetisation and introduction of goods and services tax (GST) is proving to be more disruptive for the economy than was expected earlier.
As per the report of the agency, taking out the high denomination currency while failing to remonetise the economy quickly has in many cases proved fatal for the unorganised sector/small and medium enterprise where business transactions are heavily cash dependent, as these enterprises have still not been able to recover fully, their pain is finding a reflection in overall economic growth. It added that although the roll out of GST was fairly smooth and the first month revenue collections were encouraging, some stress points have emerged.
Though, it also said that some of the initiatives/ reform measures taken by the government recently such as insolvency and bankruptcy code, corporate debt restructuring mechanism, re-capitalisation of banks, GST etc. have the potential to improve the fundamentals of the Indian economy, but their impact will be visible only in the medium to long term.
It further said that overall, the current economic landscape is not very encouraging - index of industrial production grew at a dismal 1.2 per cent in July 2017, bank credit is showing no signs of a pick-up, consumer price index based inflation at 3.6 per cent in August 2017 is a five-month high, current account deficit at 2.4 per cent of GDP in 1QFY18 is a four-year high.
