India Ratings Cuts 2019-20 GDP Growth Forecast To 5.6%

Our economy continues to suffer as the latest India Ratings and Research (Ind-Ra) has revised its 2019-20 India GDP growth forecast downwards to 5.6 per cent from an earlier estimate of 6.1 per cent. The agency in a report also said new projections suggest that that GDP growth in the second quarter (2Q) of the current fiscal is likely to be 4.7 per cent. "This revision became inevitable as high-frequency data now suggests that the agency's estimate of 2QFY20 GDP growth coming in a little higher than 5 per cent is unlikely to hold," Ind-Ra said in a statement.

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"The new projection suggests that 2QFY20 GDP growth is likely to be 4.7 per cent. Despite favourable base effect, declining growth momentum suggests that even the 2H (second half)FY20 will now be weaker than previously forecasted and is likely to come in at 6.2 per cent."

The agency further noted that even a 5.6 per cent GDP growth will require "heavy lifting by the government".

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"Although government expenditure did not witness much traction in 1QFY20 due to parliamentary elections, it picked up significantly in 2QFY20," the statement said.

"Combined capital and consumption expenditure of Central and 20 state governments in 2QFY20 grew 37.8 per cent and 20.1 per cent respectively, and Ind-Ra expects it to continue in 2HFY20 leading to Central government's fiscal deficit coming in at 3.6 per cent of GDP."

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As per the statement, FY20 GDP growth can even come lower than 5.6 per cent, if the government continues to adhere to the budgeted fiscal deficit target of 3.3 per cent of the GDP by cutting expenditure.

Not only this, a recent report by Reuters, Moody's said it estimates that the country's growth slowdown is in part long-lasting while backing its other ratings for India. For the 11th straight month, domestic passenger vehicle sales dropped by 23.69 per cent in September to 2,23,317 units, down from 2,92,660 units in the year ago period. Domestic car sales were down 33.4 per cent to 1,31,281 units.

Last month as against 1,97,124 units in September 2018, according to data released by the Society of Indian Automobile Manufactures (SIAM) in October. The Centre for Monitoring Indian Economy (CMIE), in its most recent report, highlighted that India¡¯s unemployment rate has hit a three-year low.

The unemployment rate rose to a three-year high of 8.48 per cent in October, up from 7.2 per cent in September. The unemployment rate for the month is highest since August 2016, reflecting an overall economic downturn in the country.