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Crisil lowers GDP forecast to 7% in FY18 on GST hiccups

Mumbai: Domestic rating agency Crisil today lowered its growth forecast to 7 per cent for fiscal 2018, down from 7.4 per cent earlier, as it sees disruptions arising from the implementation of the new uniform tax regimeto continue to impact the economy for a few more quarters. 

In the quarter to June, economic expansion slumped to 5.7 per cent, the slowest in the past three years and the country lost the tag of being the fastest growing large economy again to China. 

This year will see some more headwinds in the form of GST (goods and services tax) related disruptions, even as the economy tries to recover from the impact of the note-ban announced last November, Crisil said in a report. 

“We scale down our GDP growth forecast for fiscal 2018 to 7 per cent, from 7.4 per cent earlier. We believe GST- related disruptions will limit the upsides to growth for a few more quarters because there are uncertainties around the possibility of changes to the given tax structure and as businesses adjust to this new regime,” it said. 

The 7-per cent growth forecast implies a GDP growth of 7.4 per cent in the remaining three-quarters and is still higher than the reading by most other analysts which are all under 7 per cent. 

Crisil said the economy can only grind its way up in an environment of subdued global growth and weak domestic investments because the benefits of low commodity prices till last year may not be available this year and hence the bottom line may remain under pressure. 

On the external front, though global growth prospects appear somewhat better relative to 2016, factors like the falling trade growth, rising geopolitical risks and uncertainties surrounding the pace of normalisation of monetary policy in the advanced nations, coupled with rupee appreciation would mean contribution of exports to domestic economic growth would be limited, it warned. 

Crisil also warned that manufacturing growth could slow down to 7.6 per cent in the current fiscal year from 7.9 per cent last fiscal year. Agricultural growth, however, is expected to be buoyant. 

“The services sector may perform a little better as we expect some improvement in areas such as trade, hotels & transportation, and financial services, real estate and professional services,” it said, adding services may clip at 8.1 per cent compared to 7.7 per cent last year

Source: Economic Times