GDP growth may accelerate to 7.2% in FY20 on lower oil prices, political stability: Report

Mumbai: American brokerage Goldman Sachs on Friday pegged the Indian GDP growth to accelerate to 7.2 percent in 2019-20 on lower oil prices, political stability and removal of infrastructure bottlenecks.

Risks to the estimate, which is higher than the Reserve Bank of RBI's projection for a 7 percent growth, are on the "downside" because of the issues in the non-bank lenders, it said.

It can be recalled that the growth had dipped to a nearly five year low of 5.8 percent for the March quarter at
5.8 percent, dragging down FY19 growth to 6.8 percent.

 GDP growth may accelerate to 7.2% in FY20 on lower oil prices, political stability: Report

Representational image. Reuters.

In a report that came a day after the policy review by RBI, in which key rates were cut 0.25 percent to spur growth, the brokerage said it expects an acceleration in GDP to 7.2 percent.

"The acceleration is based on our assumption of lower oil prices in FY20, an increase in confidence post the elections once the new government and the cabinet take office, and some easing of infrastructure bottlenecks," it said.

On the concerns surrounding NBFCs, the brokerage said lending by such companies grew sharply in recent times and stood at 26 percent in the third quarter of 2018, which has slipped to 20 percent in the succeeding quarter, and is expected to slow further.

Regulatory actions proposed by the RBI to tackle the liquidity problems, and the asset liability mismatches will lead to the dip in loan growth by the companies, it said.

The RBI is likely to cut rates by a similar 0.25 percent once more in July-September 2019 as inflation remains within its comfort range, it said.

However, once the growth rises and with it the inflation, the focus will be back on tightening and the
Central bank may move with two hikes of 0.25 percent each in 2020, it said.

It can be noted that the RBI had shifted stance of the monetary policy to "accommodative" which was explained as a scenario where there will be no rate hikes.

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Updated Date: Jun 07, 2019 16:22:13 IST