Mumbai: Foreign brokerage firms like UBS and Jefferies expect India’s growth to remain subdued, as there are no signs of pick-up in consumption, capex and credit growth.
Analysts don’t see any major growth in the capex cycle even as new capacity addition annou-ncements have declined 80 per cent year-on-year .
“We expect India's real GDP growth to remain sluggish in FY20 as well after slowing to a five-year low of 6.8 per cent in FY19. We are lowering our FY20 real GDP growth forecast further to 6.7 per cent YoY (from 6.9 per cent YoY), which is 30 basis point below consensus. UBS India Financial Conditions Index suggests growth momentum will remain subdued until H1 (Apr to Sept 2019). The consumption slowdown in the economy is underway and real fixed capex growth will take some more time to recover. As such, we now expect the RBI to ease the policy rate by another 75 bp (previous forecast 25 bp) in FY20," said Tanvee Gupta Jain, Economist, UBS India.
India saw a dip in its real GDP growth in rupee terms during 2018-19, as the economy grew by just 6.8 per cent as compared to 7.2 per cent in the previous fiscal.
According to analysts, there is very little fiscal headroom to stimulate economic growth. The Centre's fiscal position is challenged and the deficit stood at 3.4 per cent of GDP in FY19. In the recent budget, the Centre lowered the fiscal deficit target to 3.3 per cent for FY20.
Jefferies Activity Index growth remained negative for the second month in a row in May, implying GDP growth of 4 per cent.
“The momentum indicator remained negative, with only seven of 36 indicators improving. Most consumption and trade data were negative. Bank credit growth is also moderating. Preliminary capex data shows a sharp fall in new announcements (though subject to revision). Industry data remains mixed, with Electricity the key positive, Jefferies said in a report.
The five-month dip in the momentum indicator was the longest since 2010....