Indian Economy News

India's GDP Expected To Grow At 7.4% In FY19 According To FICCI Economic Outlook

New Delhi: The latest round of FICCI's Economic Outlook Survey forecasts an annual median GDP growth at 7.4% for 2018-19, with a minimum and maximum range of 7.1% and 7.5%, respectively. The projection is in line with the estimates put out by the Reserve Bank earlier this month.

The median growth forecast for agriculture and allied activities has been put at 3.0% for 2018-19, with a minimum and maximum range of 2.4% and 4.3%, respectively. The favourable monsoons are expected to bode well for the sector. Although there has been some slippage in the monsoons during the months of June and July, updated forecast for August and September indicate a pick-up in rainfall. Further, industry and services sector are expected to grow by 6.9% and 8.3%, respectively in 2018-19.

The survey was conducted during the month of July 2018 amongst economists representing industry, banking and financial services sector.

The quarterly median forecasts indicate a GDP growth of 7.1% in the first quarter of 2018-19. The growth numbers for the first quarter are expected to be released by Central Statistical Organisation later this month.

With regard to inflation, the latest official numbers report prices edging up once again on the back of elevated fuel prices. However, the outlook of the economists on inflation seems benign. The median forecast for Wholesale Price Index based inflation rate for 2018-19 has been put at 4.8%, with a minimum and maximum range of 4.1% and 5.0%, respectively. The Consumer Price Index also has a median forecast of 4.8% for 2018-19, with a minimum and maximum range of 3.0% and 5.5% respectively.

On the external front, concerns remain with median current account deficit forecast pegged at 2.5% of GDP for 2018-19. Merchandise exports are expected to grow by 9.8% while imports are expected to grow by 14.2% during the year. The sharp increase in oil prices over the past year is likely to have repercussions on current account and fiscal account deficits. Also, trade tensions have escalated over the past few months with a whole host of countries undertaking retaliatory measures (China, Mexico, Canada etc.) in response to measures announced by the US. This has emerged as a key concern going ahead.

A majority of participating economists believe that an extension of the trade war beyond the short term can significantly impact India. It was mentioned that as inflation levels rise in the US on the back of higher domestic prices of imported goods, it may lead to a further increase in interest rates causing even greater outflow of foreign capital from emerging economies including India. Furthermore, an increase in tariffs by the US will make Indian goods less competitive and more so if India also plans to increase import tariffs.

Economists expressed fears that if countries fail to reach a consensus, the world risks a breakdown of a rule-based multilateral trade system which would greatly harm India?????????s interests. Nonetheless, some of economists felt that the US-driven trade war is temporary. It was felt that that the US would reconsider the new tariff structure and might, in fact, revoke many of the new tariffs in the medium term (by early 2020) before entering the general elections.

Moreover, the Rupee has been facing several headwinds and the Rupee-USD exchange rate depreciated to an all-time low in June 2018. The participating economist were asked to share their prognosis about the movement of Rupee in the near term and the likelihood of Re-USD exchange rate breaching the 70 mark.

The economists unanimously felt that Rupee will continue to be under pressure in 2018-19. It was felt that movement in oil prices and domestic as well as global economic developments will remain the two key swing factors for the Rupee.

Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.

Partners
Loading...