New Delhi, Dec 18 (PTI) India's growth prospect is likelyto see a slowdown in the next two years followed by recoveryin the medium term, with 2019-20 GDP expected at around 7.6per cent, says a report by HSBC.
According to the global financial services major, India'sgrowth story has a two-part narrative. The first is a slowdownand gradual recovery in the short run, likely over 2017-18 and2018-19 as key sectors revive from disruptions related to theimplementation of the goods and services tax (GST).
The subsequent narrative is of brighter growth prospectsin the medium term (2019-20 and beyond), HSBC said in thereport adding that "we forecast growth at 6.5 per cent, 7 percent and 7.6 per cent over 2017-18, 2018-19 and 2019-20respectively".
In the medium term, GST alone may add 40 bps to GDPgrowth through productivity gains, it noted.
The report further said "if the other side of India'stwin balance sheet problem – overleveraged companies– lingersfor longer, the pace of the investment revival and GDPrecovery could suffer".
Moreover, inflation may begin to rise as growing consumerdemand hits the wall of supply-side constraints, it noted.
Regarding India's current account deficit (CAD), HSBCsaid it is set to widen to 1.7 per cent in 2017-18 and to 1.9per cent in 2018-19, and then reach 2.1 per cent in 2019-20led largely by rising imports of oil and items such aselectronic goods and smartphones, reflecting changing consumerpreferences domestically.
"On the fiscal front, there are upside risks to thecentral government's 3.2 per cent deficit target emanatingfrom lower-than-budgeted nominal GDP growth, a lower-than-budgeted RBI dividend, and a higher seventh pay commissionbill," it noted. PTI DRRANU.
This is unedited, unformatted feed from the Press Trust of India wire.