DBS raises real GDP forecast to 7.4% for current fiscal from 7.2% earlier on consumption and higher public spending

New Delhi: Global financial services firm DBS has raised India's real GDP forecast for the current financial year to 7.4 percent, as against 6.7 percent in the last fiscal, driven by consumption and higher public spending, said a report.

"The FY19 growth trajectory should be viewed in two halves – strong first half before momentum tapers. We revise up our real GDP estimate to 7.4 percent from 7.2 percent previously," DBS said.

"The economy has recovered since the transitory shocks of demonetisation and GST rollout," DBS said in a research note adding that consumption, both urban and non-farm, and higher public spending is expected to lift growth.

The report noted that the remonetisation process is complete and that "currency with the public has not only returned to pre-demonetisation levels but also surpassed trend growth."

Representational image. Reuters.

Representational image. Reuters.

The report stated that while private consumption is likely to benefit from better urban and non-farm spending, the agricultural sector will have to deal with easing real wage growth, falling crop prices and weak terms of trade.

The report also said that base effects will prop-up growth numbers in the first half of this financial year, but in the second-half, GDP numbers are expected to taper off.

In the January-March quarter, India's gross domestic product (GDP) grew at its fastest pace in seven quarters at 7.7 percent on robust performance by the manufacturing and service sectors, alongside a good farm output.

The report, however, cautioned that while a cheaper currency is expected to benefit exports, a challenging global demand outlook and simmering trade disputes might outweigh any boost to growth.

Besides, imports will be led by higher oil purchases and strong demand for capital and consumer goods (electronics), it added.


Updated Date: Aug 21, 2018 17:17 PM

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