Business Today
Loading...

India's real GDP growth in FY20 to be below 5%; revival steps to take time to filter through economy: IHS Markit

India's GDP growth rate slowed down to 4.5 per cent in the July-September quarter of this fiscal; matters have worsened since the June quarter when GDP growth slowed to 5 per cent, lowest in six years and a quarter

twitter-logoBusinessToday.In | December 8, 2019 | Updated 14:12 IST
India's real GDP growth in FY20 to be below 5%; revival steps to take time to filter through economy: IHS Markit
RBI has reduced its GDP forecast for the financial year 2020 to 5 per cent from 6.1 per cent earlier

India's real GDP growth in the current financial year is expected to be below 5 per cent as the revival measures taken by the Modi government will take time to filter through the economy, an IHS Markit report said. "Financial sector fragilities continue to weigh on India's economic growth momentum, with the high level of non-performing loans on the balance sheets of the public sector banks, constraining their new lending," the IHS report said.

India's GDP growth rate slowed down to 4.5 per cent in the July-September quarter of this fiscal, data by the National Statistical Office released showed. Despite all government efforts to arrest slowdown, this is the slowest growth rate Indian economy has registered in six and a half years. The decline in economic growth came on the back of dwindling consumer demand, slowing private investment and global slowdown. Matters have worsened since the June quarter when GDP growth slowed to 5 per cent, lowest in six years and a quarter. In the first half of FY20, the GDP growth has slowed to a pace of 4.8 per cent as compared to the 7.5 per cent a year ago.

The HIS report said that there were risks from potential contagion effects due to crisis in the non-banking finance companies (NBFC) sector, which could hurt banks' balance sheets with high NPA (non-performing assets) loans.

"Following the weak GDP outturn for the September quarter, Indian real GDP growth in FY 2019-20 is expected to be slightly below 5 per cent, as it is anticipated that the impact of stimulus measures will take time to filter through to the real economy," IHS said.

The Reserve Bank of India also reduced its GDP forecast for the financial year 2020 to 5 per cent from 6.1 per cent earlier. The RBI's high-powered Monetary Policy Committee (MPC) accepted that economic growth had weakened further and output gap remains "negative". "The real GDP growth for 2019-20 is revised downwards from 6.1 per cent in the October policy to 5.0 per cent - 4.9-5.5 per cent in H2 and 5.9-6.3 per cent for H1:2020-21," the central bank had said. Since February, the RBI has revised its GDP growth projections for the financial year 2020 from 7.4 per cent in February to 5 per cent now, which is sharpest such revision in the recent years.

Also read: MPC meet: RBI revises GDP forecast to 5%; says economic growth has weakened further

Furthermore, any turnaround in the investment cycle could also be relatively protracted, depending on the ability of the government to accelerate its infrastructure spending program, the IHS report said.

IHS report said that auto manufacturing has been the weakest sector among all. "The Indian auto sector has slumped into a crisis, with hundreds of thousands of auto sector workers in the production and distribution segments having been laid off over the past 12 months".

Notably, India's $57 billion automotive component industry, which accounts for 2.3 per cent of country's GDP and employs over 5 million people, has witnessed its worst-ever half-yearly performance with overall revenues registering a de-growth of 10.1 per cent at Rs 1.79 lakh crore in 2019-20. This has resulted in around 100,000 people losing their jobs and an estimated investment loss of about $2 billion that would have happened had the industry continued to grow.

ALSO READ:Steel demand to slow down on weak auto, manufacturing order: Moody's

Edited by Manoj Sharma with PTI inputs

Youtube
  • Print

  • COMMENT
BT-Story-Page-B.gif
A    A   A
close