Crisil lowers GDP forecast to 7% in current financial year on GST hiccups

Mumbai: Domestic rating agency Crisil on Monday lowered its growth forecast to 7 percent for fiscal 2018, down from 7.4 percent earlier, as it sees disruptions arising from the implementation of the new uniform tax regime to continue to impact the economy for a few more quarters. In the quarter to June, economic expansion slumped to 5.7 percent, 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. [caption id=“attachment_4008427” align=“alignleft” width=“380”]  Reuters[/caption] “We scale down our GDP growth forecast for fiscal 2018 to 7 percent, from 7.4 percent 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-percent growth forecast implies a GDP growth of 7.4 percent in the remaining three quarters and is still higher than the reading by most other analysts which are all under 7 percent. 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 bottomline 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 percent in the current fiscal year from 7.9 percent 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 percent compared to 7.7 percent last year.