Published: Sun, June 03, 2018
Finance | By Kristine Clayton

Moody's cuts India's projected growth rate for 2018

Moody's cuts India's projected growth rate for 2018

Figures from the Central Statistics Office showed GDP growth improved from the last quarter, which expanded at 7.2 percent, reinforcing India's status as one of the world's fastest growing economies.

As per the Provisional estimates of national income, the growth rate of GDP at constant (2011-12) prices for the financial year 2017-18 is estimated at 6.7 percent.

Moody's Investors Service, a credit rating firm on Wednesday estimated a 7.3 per cent growth in Indian Gross Domestic Product (GDP) for the year 2018, thereby cutting it down from a previously projected 7.5 per cent. Moreover, the improvement in the construction GVA growth in Q4 FY2018 benefitted from the base effect, given the issues related to demonetisation, including the availability of labour, Nayar said.

The quarterly gross value added stood at 7.6 percent for the January-March 2018 period.

"GVA growth also escalated to 7.6% y-o-y from 6.6% in Q4, primarily driven by agriculture and industry".

"GDP growth has been increasing continuously every quarter".

If the poll is right, January-March would have the fastest expansion since before the government's surprise decision in November 2016 to scrap high-value currency notes and a botched implementation of a goods and services tax (GST) in July a year ago stalled growth.

The government will release GDP data today around 1200 GMT.

"Accordingly, we expect the Reserve Bank of India (RBI) to raise its policy repo rate by 50bps in 2018 with the first hike of 25bps at their meeting next week", added ANZ.

Assocham Secretary General D S Rawat said, "While Indian economy is in cyclical recovery led by both investment and consumption, however, higher oil prices and tighter financial conditions will weigh on the pace of acceleration". Higher cost of financing is also likely to slow investment and consumption spending across government, households and firms, said Abhishek Gupta, of Bloomberg Economics.

DOWNSIDE RISKS: The recovery could be threatened by higher global crude oil prices, which this month hit $80 a barrel, their highest since 2014.

The private corporate sector growth (which has a share of over 70 per cent in the manufacturing sector) as estimated from available data of listed companies with BSE and NSE was 9 per cent at current prices during 2017-18. However, the ability of the public sector banks to support lending growth, the risk of monetary tightening and trade wars, and the impact of higher crude oil prices on purchasing power of consumers and corporate earnings have emerged as risks.

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