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India’s GDP To Grow At 7.5% In FY16, Says Report

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India Ratings on Thursday (29 October) revised downwards to 7.5 per cent the GDP growth forecast, from earlier estimate of 7.7 per cent, for the current financial year because of weak agricultural growth.

"The downward revision in forecast is primarily due to the lower agricultural growth caused by a deficient rainfall," India Ratings and Research said in a report on Thursday.
 
Although investment is showing the signs of incipient recovery, the rating agency believes a full blown investment recovery will take anywhere between 12-18 months. The likelihood of the consumption demand growing at 8.2 per cent has brightened in FY16 on a significant moderation in inflation and inflationary expectations. 
 
It expects agricultural growth to expand 0.9 per cent this fiscal from 0.2 per cent of FY15. 
 
The report said that although the sector has over the years become more resilient to monsoon shocks, agricultural output in a large parts is still dependent on rains.
 
The encouraging part is the sowing of kharif crop for 2015. The total area sown under kharif crops till October 16, 2015 reached 103.88 million hectares from 102.66 million hectares for the same period in 2014, it said.
 
It added that although investment is showing signs of incipient recovery, a full blown investment recovery will take another 12-18 months.
 
According to India Ratings, the industry is likely to expand 6.8 per cent in FY16, 0.2 percentage points higher than its earlier forecast.

"Besides, the government's key focus 'Make in India', a budgetary push, the early signs of revival in investment or consumption cycle coupled with a fall in inflation and interest rates are expected to drive the industrial recovery," the report added.
 
The inflation based on both wholesale price index and consumer price index moderate to negative 1.5 per cent and 4.8 per cent, respectively in FY16, it said.
 
Despite unforeseen supply side shocks to select agricultural commodities, the overall inflation has remained benign so far in FY16 and Ind-Ra expects it remain so even in the remaining months of this fiscal. Moderation in inflation/inflationary expectations has prompted the Reserve Bank of India (RBI) to cut the repo rate by 125bp so far in 2015. However, RBI by calling the 50bp repo rate cut, in its fourth bi-monthly review on 29 September 2015, a frontloaded policy action has nearly shut the door on further rate cuts in FY16. 
 
The report further added that the fiscal deficit target of 3.9 per cent for FY16 is achievable because the projections of government's net earnings and expenditure for the year are modest.