NEW DELHI: High lending rates, slowdown in growth of consumption rates, and issues in mining and project clearances have forced rating agency Crisil to lower the current fiscal’s growth forecast for India from 6.4% to 6%.
During the Budget presentation, Finance Minister P Chidambaram had said that India can achieve growth rate of 6.1% - 6.7%. Household consumption rates are still quite low and will continue to grow at a slower pace. Also, the recent repo rate cut by the apex bank are yet to show changes in the lending rates leading to “downward rigidity”.
However, Crisil said that it expects India to achieve more than 5% growth rate this fiscal. But issues in policy making around delaying project clearances and mining will continue to hamper the manufacturing and infrastructure activities in India.
The report has also stated the lowering of European GDP forecast from -0.1% to -0.5% to have an impact on India’s economic growth this fiscal.
The current account deficit had touched a high of 6.7% during the third quarter of last year’s fiscal, causing agencies like Standard & Poor’s and Fitch to consider downgrading India. However, Crisil feels that the CAD could reduce to 4.5% this fiscal on account of reduction in crude oil and metal prices.
The report also expects the Indian rupee to stabilize to around 54 against the US dollar by the end of this fiscal.