CARE Ratings has revised the India’s Gross domestic products (GDP) estimate downward from 6.7-6.8% earlier to 6.4-6.5% for current financial year (FY20) with the underlying gross value added (GVA) growth of 6.3-6.4% on account of subdued growth in the industrial sector and weakness in the agricultural sector during Q1FY20. The agency mentioned that in the light of sharp economic growth slowdown in Q1FY20 and with consumption and investments unlikely to see a sharp upward shift, the improvement in the economic growth would only be gradual and limited. India recorded a dismal GDP growth of 5% in the first quarter of the ingoing fiscal, on account of slower growth in manufacturing sector.
Besides, it said ‘110 bps interest rate cut by the Reserve Bank of India (RBI). The RBI has mandated banks to link all their fresh loans extended to retail and MSME sector to an external benchmark from October 1, 2019. The impact will be seen on the incremental loans extended to these sectors and will help facilitate transmission mechanism.
The agency also expects the demand to pickup in the festive season. Even favourable monsoons may come out good for rural incomes. Better business environment on account of the recent measures announced by the government including efforts to improve the flow of credit as well as transmission mechanism.
