India Ratings pegs Economy to grow at 7.4% in FY18

Fitch Group Company, India Ratings and Research expect Indian economy to grow 7.4% in 2017-18 buoyed by consumption demand and government spending. However, the rating agency revised down its GDP growth estimate for 2016-17 to 6.8% from 7.9%, which is even lower than Central Statistical Organisation’s advanced estimate of 7.1%. India's economic growth forecast of 7.4 % by Ind¬Ra in 2017-18 is on the upper end of the 6.75-7.5 % band estimated in the Economic Survey.

On the global front, it said imports will get hit because of rising protectionism and that US President Donald Trump’s trade agenda and the current direction of European politics, both have the potential to “create a global economic and market turmoil” in 2017. “Trade growth is below GDP growth which means countries are not as open as they were… We will have to look at domestic demand drivers,” said Sunil Kumar Sinha, principal economist at India Ratings & Research while launching the outlook report for FY18 on Tuesday.

India Ratings doesn’t expect significant improvement in investment demand in FY18 citing weak capacity utilisation of manufacturing sectors and high debt as a constraint in private sector investment . While the government’s investments grew at a CAGR of 11.6% during 2011-¬12 to 2015¬-16 due to a capex push, the setback to investment growth came from the household sector whose investments contracted 2.2% in the period. “It is unlikely that investment will revive…Reviving investment cycle with government capital expenditure alone will not be of help,” Sinha added. Real estate, ownership of dwelling and professional services, and manufacturing together accounted 44.3% of the total investments in the economy.