Full-year GDP growth outlook cut by a notch

Mumbai: Analysts cut their growth forecasts for the full year by a notch and warned of fiscal slippage for the year ending March 2019, following the lower-than-expected GDP print for the September quarter released by the government Friday evening.  Official data showed GDP growth has slipped sharply to 7.1 per cent in the second quarter, even as government has breached the fiscal deficit target with five more months to go at over 103 percent of the projected level.

The fiscal consolidation target for the year is budgetted at 3.3 per cent–something it has been retaining for the past two fiscals. Domestic rating agency Crisil cut its GDP growth forecast for the entire fiscal to 7.4 percent from 7.5 percent earlier, blaming weak global cues.  It also said if the liquidity issues persist in the system, demand could get further dented.

Its smaller rival Care Ratings also cut its forecast by a similar measure to 7.4 percent, saying the subdued pickup in economic activity in the second quarter and constraints in the financial system will dent growth. Analysts at Icra Ratings retained their growth forecast but a much lower level of 7.2 percent. Similarly India Ratings also reiterated its 7.3 per cent estimate.

GDP growth slipped to 7.1 percent from the surprisingly high level of 8.2 percent notched up in the preceding quarter. The country had achieved a 6.7 percent growth in the previous fiscal. On the fiscal deficit front, virtually all the analysts were unanimous in warning of a slippages.

“Fears of a fiscal slippage in FY19 may intensify following the sharp 23.5 percent rise in fiscal deficit during the April-October period, which crossed the budget estimate for the full year, despite the relief offered by the recent correction in crude oil prices,” Icra said in a note.

Care Ratings said meeting the 3.3 percent level will be contingent on realisation of the Rs 80,000-crore divestment target and higher GST collections but added that GST collections have been lower than the target for the five of the first seven months of the year.

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