GST, implementation of 7th pay to contribute India's consumption growth: Crisil

Predicting a stronger growth in India’s domestic consumption in 2016-17, led by implementation of 7th pay panel’s recommendations coupled with reforms like the Goods and Services Tax (GST), global ratings agency Crisil has said that these developments will boost India's consumption growth.

Crisil said that India's domestic consumption increased so far this year, due to strong domestic consumption in auto-ancillaries, packaging and pharmaceutical sectors and expects the rural demand to pick up in the second half of the current fiscal. It also said that from industry perspective, consumption related companies are expected to grow. The growth will now be supplemented by rural India. It added that private consumption will grow 8.3% in the current fiscal, 90 basis points higher than the 7.4% recorded last year as people, especially in rural India, will buy consumer durables, fast moving consumer goods and vehicles with the higher farm income generated due to an almost normal monsoon.

For the remaining half of the fiscal, it said that the credit profile will further improve because of a healthy demand, improvement in liquidity profile and stabilisation of metal prices. It added that rainfall this fiscal has been just 3% below normal and consumer inflation would be contained within the RBI’s tolerance zone of 5%. The rating agency emphasised that sustainability will continue to be critical as there were hurdles like investment in infrastructure, slow transmission of Reserve Bank of India rate cuts from banks to customers that needed to be looked into. It added that weak demand still continued in the real estate and construction sector, although road sector is doing better, but it will take time for it to become visible.