India's Gross Domestic Product (GDP) growth is likely to decrease to 4.7 percent, from 5.2 percent predicted earlier, for the Financial year 2020, latest reports citing high-frequency indicators say.
According to Kotak Mahindra Bank's growth estimates, the consumption and investment-related slowdown in the first quarter of FY 20 has further worsened in the second quarter, despite public spending efforts by the government.
"We now expect 2QFY20 GDP growth at 4.7 percent (5.2 percent earlier). Even though the government has announced corporate tax rate cuts and a new fund to support stalled projects, they are unlikely to contribute substantially to growth in the near term in the absence of demand," Kotak report stated. As industrial production contracted stood at just 4.3 percent in September, it is the sector's worst performance since October 2011.
Other financial estimates, including the monthly report by the Economic Research Department of State Bank of India (SBI) called Ecowrap, reported a likely decline in the current financial year.
"The second-quarter GDP growth rate is likely to slip to 4.2 percent on account of low automobile sales, deceleration in air traffic movement, flattening of core sector growth and declining investment in construction and infrastructure," the report stated.
The official GDP data for the second quarter will be released on November 29 and the first full-year estimate will be issued in January.
The full-year growth was estimated by SBI at 5 percent, less than the 6.1 percent that it had estimated earlier. It also stated it expects "larger rate cuts" from RBI in the December monetary policy and cautioned against such move. Reports reveal the economy grew just 5 percent in the June quarter, its slowest pace in six years.
Increase in food inflation is also stated to be 'seasonal' and expected 'abundant' rainfall is likely to lower food prices ahead.
The figures align with the GDP outlook suggested by Moody's rating agency which stated India's economic outlook had shifted from 'stable' to 'negative' based on lower government and policy effectiveness at addressing long-standing economic and institutional weaknesses than Moody's had previously estimated.
Government initiatives
The government, on the other hand, had said that it had taken several initiatives in the financial sector, including reforms to strengthen the economy. The corporate tax rate was cut to 15 percent and a Rs 25,000 crore special window to revive stalled real estate projects in a bid to revive the economy.
"The fundamentals of the economy remain quite robust with inflation under check and bond yields low. India continues to offer strong prospects of growth in the near and medium-term," the Finance Ministry had said.
(With inputs from agencies.)
