India Ratings ups India’s FY19 GDP growth to 7.4%, cautions on bank NPAs

Expectation of normal rains, boost in private and government expenditure along with green shoots emerging in investment spending have prompted India Ratings and Research to revise its FY19 GDP growth forecast to 7.4% from 7.1% earlier. However, the Fitch Group company cautioned that headwinds from the higher bank NPAs, elevated bond yields and trade protectionism may cause disruption.

Tightening global financial markets in combination with the NPA-laden domestic banking sector could affect international capital inflows, it cautioned.

“From the expenditure side, the boost is expected to come from both private and government expenditure coupled with green shoots emerging in investment spending,” the ratings firm said.


As per the report, FY19 growth will continue to be driven by consumption and associated sectors such as automobiles, cargo handled at major ports, railway freight, domestic air passengers and consumption of petroleum products.

Leaving behind the adverse impact of demonetisation and Goods and Services Tax (GST), industrial production has improved since November 2017. Industrial recovery led by manufacturing is likely to strengthen and will push power demand, according to the outlook.

“GST and demonetisation impact is slowly fading away. However, the economy is yet to realise the benefit of GST. We believe the e-way bill system will improve GST collection,” said Devendra Kumar Pant, chief economist at India Ratings.

India’s GDP growth saw a temporary dip in the last two quarters of 2016-17 and the first quarter of 2017-18 due to demonetisation and disruptions surrounding the initial implementation of GST.

India's economic growth had slipped to a three year low of 5.7% in April-June quarter of the current fiscal, though it recovered in the subsequent quarters.

The economy is expected to grow at 6.6 % in 2017-18, as per the second advanced estimates of the Central Statistics Office (CSO), compared to 7.1% in 2016-17. The earlier estimate was 6.5%.

World Bank has pegged India’s FY19 GDP growth at 7.3%.