India is slowing down so fast that even experts can’t keep up

• The agencies and government seems confused about India’s growth rate.
  
  
• On November 26, India Ratings revised its GDP growth forecast for the fourth time this year.
  
  
• In October, RBI too had cut growth estimates as consumer demand remained sluggish.

India’s financial health is failing so fast that experts have had to revise their projections time and again.


The country’s second quarter GDP growth rate-- which is the country’s traditional festivals season--came at a dismal 4.5%. This means that the annual growth rate might be much slower than the most pessimistic estimates.


No matter what the growth rate, if there is some predictability, it helps investors make informed decisions. But as India Ratings, a Fitch company in India, said it had to revise its estimates four times in four months this year.



“This revision became inevitable as the high-frequency data now suggests that the agency’s estimate of second quarter GDP growth coming in a little higher than 5% is unlikely to hold,” the agency said.

Now that the government itself is admitting that the fourth quarter came in at 4.5%, the year’s projected growth rate could be revised again. “Despite favourable base effect, declining growth momentum suggests that even the second half of the year will now be weaker than previously forecasted and is likely to come in at 6.2%,” India Ratings said.

Yet another international agency Moody’s too had cut its growth forecast for the financial year in October to 5.8% from 6.2% earlier. And it’s not just the private agencies, even the Reserve Bank of India is struggling to put a finger on what the final growth number for the year will be.

In October, the Reserve Bank of India cut GDP growth estimate for the year sharply down to 6.1% from 6.9% earlier after it admitted that consumer demand remained sluggish.

In the previous bi-monthly policy review, the governor Shaktikanta Das had hoped that the second half of the financial year might show growth, but is to be seen how can consumer sentiment pick up as the country slows down.

If one doesn’t know the magnitude of the problems, it is difficult to find an appropriate solution.


SEE ALSO

India’s GDP growth is as bad as the worst estimates ⁠— as the economy slows down for the fifth quarter in a row