Care Ratings brings down India’s GDP forecast to 7.5-7.6% in FY16

India’s GDP forecast for the current fiscal has been brought down to 7.5-7.6% from its earlier projection of 7.8-8%, as per Ratings Agency CARE Ratings.
The above result has been reached on the basis of global developments like slowdown in China, Yuan depreciation, Fed rate hike and domestic factors like monsoon that have come in the way of realization of earlier projections that the agency made.

"Global growth has lowered down and the initial anticipated growth is unlikely to materialize. In particular, China has slowed down and the prospects do not look too encouraging." the agency said in its report on Revised prognosis for Indian economy.

The rating action also factors in downbeat agriculture production which is pegged around a low of 0.5-1% this year as the first advance estimates for kharif crop indicate a shortfall in case of food grains and cotton besides sugarcane.

As regards with Fiscal deficit, Fitch says," The government has shown remarkable resolve to adhere to the fiscal deficit target of 3.9% set for the year, and we believe that this target will be maintained." However, the agency points out that the major risk factor for the government's fiscal position could come from its disinvestment target of 69,500 crore rupees.

The Reserve Bank of India (RBI) in its latest monetary policy review has cut the GDP growth projection to 7.4 per cent, from its earlier estimate of 7.6 per cent, on slower global and trade expansion as well as lack of appetite for new investment in private sector domestically.

Even as ratings agencies continue to cut India's GDP forecast the Modi government continues to maintain that India will grow in excess of 7.5% in FY16 largely owing to declining inflation and twin deficits under control.

Image credit: BCCL