Economists lead to cutting their forecasts for India’s economic growth and it predicted deeper interest-rate cuts after data showed a sharper-than-expected slump in output.
Goldman Sachs Group Inc. and Citigroup Inc. lowered their growth projections to 6% for the fiscal year through March 2020, while Oxford Economics Ltd. said there’s a risk the expansion could be weaker than that.
Data released on late Friday showed gross domestic product rose 5% in the June quarter from a year ago, the slowest pace in six years and lower than all the forecasts in a Bloomberg survey of economists. The weakness was broad-based, with consumption and export growth slowing while investment remained subdued.
The slump will put the onus on the Reserve Bank of India (RBI) to continue cutting interest rates after 110 basis points of easing already this year, the economists said.
The government — which is sticking to its 7% growth projection for the fiscal year — has in recent days announced a number of steps to improve India’s longer-term growth, without providing any immediate support. It will merge state-run banks to help spur credit growth, ease foreign investment rules and give concessions on vehicle purchases.
Meanwhile, as India’s GDP fell to a six-year low of 5 % for the April-June quarter, apprehensions of a slowdown have risen. Finance Minister Nirmala Sitharaman, who has announced a slew of measures off late, however, on Sunday avoided a direct answer to a query whether the economy is currently going through a “slowdown”.
At a press conference, when she was asked if the country is going through a slowdown, Sitharaman said: “The government has been in consultation with a lot of sectors. Because in some sectors, the inventory is piling up… different issues for different sectors and having heard that and having spent some time to see how best we can respond, the first tranche of announcement were made on 23 August.”