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Crisil lowers India’s GDP forecast to 5.5 percent

26 Jul 2013 Evaluate

Global rating agency Crisil has revised downwards its India's GDP growth forecast to 5.5 percent this fiscal from its earlier estimate of 6 percent, citing reduced likelihood of monetary easing going forward due to falling rupee.

Crisil has joined ADB and several brokerages who have pegged the GDP forecast lower after RBI last week came out with a slew of steps to squeeze liquidity out of the system to stabilise the continuously depreciating rupee. Crisil report in view of these action feels that stress will increase in sectors such as power, construction, engineering, and steel, and lead to higher non-performing assets in the banking system. While, India’s economic recovery will take longer than previously expected.

The Crisil report has highlighted that challenges faced by Asia’s third largest economy are mainly domestic as the global environment is more stable now than in 2009. The recent measures by RBI have significantly diminished probability of a repo rate cut during the remaining part of the current fiscal. In its view RBI's measures will push up the inter-bank rates, impacting the cost of borrowing for banks, which in turn is likely to affect lending rates in the future and the demand in rate-sensitive sectors will remain under pressure.

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