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Ind-Ra revises GDP forecast at 7.8% and retains sector GVA at 7.2%

( 14:00, 24-Aug-16)

India's most respected credit rating agency, India Ratings and Research (Ind-Ra) in its latest report titled 'Review of the Economy' has revised gross domestic product (GDP) estimate for 2016-17 to 7.8% from its earlier forecast of 7.7%. The upward revision has been prompted by the progress of monsoon and the sowing of kharif crop so far but the economy is just ‘chugging along’ despite the euphoria emerging after the formation Modi government at the Centre.

Rating agency said that the farm gross value added (GVA) should grow 3% in the current fiscal as against 2.8% forecasted earlier as area under kharif crop sowing is 5.7% higher than a normal area so far. The positive impact of monsoon on agriculture will support the overall GDP growth with its backward and forward linkages. Further it said India’s growth is in motion but not accelerating.

Ind-Ra said that government has not done anything to revive the growth. Even though services sector showed its flexibility and will continue to lead the economy, unsatisfactory progress on the industrial front is a cause of concern. Further it said that moderation in both inflation and lending rates of banks is aiding the consumption demand in urban areas. Salary revision of central government employees due to the award of the recommendations of the 7th Central Pay Commission will further aid the urban consumption demand.

The report stated that with weaker industrial growth in continuation, it retained previous forecast of sector GVA to grow 7.2%. The wait is getting longer for an investment recovery which is the main reason to hold acceleration in industrial growth. Besides, the current government has taken several initiatives to revive private investment as also the manufacturing sector growth in the country. However, all this has failed so far to revive the animal spirit in the economy. Corporate, particularly in infrastructure, power, iron and steel and textile sectors, are either repairing their balance sheets or saddled with stagnation or even decline in capacity utilization.

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