Current Affairs

India to grow 7.2% in 2018-19 down : Ind-Ra Outlook

Rating agency India Ratings & Research (Ind-Ra) in its Mid-Year FY19 Outlook has revised down India's growth to 7.2% from its earlier projection of 7.4% for 2018-19 (FY19).
India to grow 7.2% in 2018-19 down : Ind-Ra Outlook
  • The downward revision comes as Indian economy to face headwinds from high crude oil prices, increase in minimum support prices (MSP) of kharif crops, rising trade protectionism, depreciating currency and no visible signs of abatement of the non-performing assets (NPA) of the banking sector.

Ind-Ra Mid-Year FY19 Outlook Projections:

Drivers of Growth:

  • Growth in India is being primary driven by private consumption and government spending.
  • But other two engines of growth - investment and exports, have slowed down.

Capital expenditure:

  • Capex by government alone will be insufficient to revive the capex cycle of the economy.
  • Its share in total capex of economy was only 11.1% during 2012-17.
  • On the other hand, share of private corporations was 40.9%.
  • Private corporations in combination with household sector command 77.5% of total investment in the economy, so their capex revival is important for broad-based recovery in the investment cycle of the economy.

Consumption expenditure:

  • Private final consumption expenditure is projected to grow at 7.6% in 2018-19 compared to 6.6% in 2017-18, while expansion of government final consumption expenditure is expected to slow down to 8.6% from 10.9% during the same period.

Exports:

  • The annual value of exports will touch $345 billion in FY19, crossing peak of $318 billion attained in FY14, but India will continue to face headwinds on the exports front.

Rupee:

  • It has already depreciated 7.7% till July 2018 in response to elevated global turbulence, worsening of current account deficit (CAD), rising inflation and concerns related to fiscal deficit.

CAD:

  • India's currency account deficit to rise to 2.6% of GDP in 2018-19, up from 1.9 % in the last fiscal year.
  • In absolute terms, it is expected to widen to $ 71.1 billion in 2018-19 from $48.7 billion in 2017-18.
  • Mobilisation of $25 billion from non-resident Indians (NRIs), similar to funds raised in 2013, will be able to finance CAD.

Question:

Q. Which Rating agency in its Mid-Year FY19 Outlook has revised down India's growth to 7.2% from its earlier projection of 7.4% for 2018-19 (FY19)?
a. India Rankings & Research (Ind-Ra)
b. India Ratings & Research (Ind-Ra)
c. India Finances & Research (Ind-Ra)
d. None of the above
India to grow 7.2% in 2018-19 down : Ind-Ra Outlook India to grow 7.2% in 2018-19 down : Ind-Ra Outlook Reviewed by Inderjeet Virdi on August 18, 2018 Rating: 5

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