India Ratings pares India’s FY20 growth forecast on sluggish consumption demand

NEW DELHI: India Ratings and Research on Thursday pared India’s gross domestic product (GDP) forecast for 2019-20 to 6.1%, the second downgrade in two months. The agency had revised its GDP growth estimate to 6.7% from its earlier forecast of 7.3% in August.

The downward revision follows the Central Statistical Organisation (CSO) estimating first quarter growth at 5%, lower than India Ratings’ estimate of 5.7%.

“Although India Ratings had cited a slowdown in both urban and rural consumption demand growth as one of the key reasons for the downward revision of GDP in its August 2019 forecast, CSO’s fIrst quarter estimate shows that the slowdown has been much sharper than expectation,” the ratings agency said in a report.


Private consumption crumbled to 3.1% in the first quarter compared to 7.2% a quarter ago and 7.3% a year ago.

“The GDP growth in first half is likely to be 5.2%. India Ratings expects it to recover to 6.9% in the second half, mainly on account of the base effect,” it said.

It highlighted that demand side is the bigger challenge facing the economy due to a collapse in consumption demand and private corporate investment not forthcoming.

“Therefore, Ind-Ra believes the need is to take steps/measures that will enhance the disposable income/put additional money in the hands of rural/urban households,” it said.

Additionally, the government also needs to step up its spend on rural infrastructure activities such as rural roads/rural housing, Mahatma Gandhi National Employment Guarantee Scheme to generate large-scale employment that could add/stimulate consumption demand.