Crisil Pegs Growth at 6.5% for 5 Years

Published: 21st April 2014 06:00 AM  |   Last Updated: 21st April 2014 01:44 AM   |  A+A-

The country’s economy is set to grow by an average 6.5 per cent every year during 2014-15 to 2018-19, roughly the period of the next government, if it lasts its full term, said research firm Crisil.

This is lower than the 9 per cent growth rate recorded during 2001-04 and 2010-11. Economy grew at a decade-low of 4.5 per cent in 2012-13 and is officially projected to expand 4.9 per cent in 2013-14.

“Our base-case forecast of an average GDP growth of 6.5 per cent is premised on a decisive mandate in the upcoming general elections,” Crisil said in its study of Growth and Missed Opportunity.

Sale of products in sectors like automobiles, consumer durables, housing, cement, steel would be affected as the economy will not be able to grow by 9 per cent but would expand by just 6.5 per cent, it said.

If a rag-tag coalition comes, economic growth could be stuck at 5 per cent in the next five years, it cautioned.

While not ruling growth above 6.5 per cent, Crisil, said 9 per cent growth, however, is difficult.

“If everything falls in place, growth could rise much above 6.5 per cent...but nowhere near the 9 per cent heyday,” it said.

According to D K Joshi, chief economist, Crisil, factors such as bad health of the financial sector, excess capacity in companies particularly auto, no room for counter-cyclical measures both in monetary and fiscal terms and pending environment issues make the 9 per cent growth rate target difficult to achieve.

The 6.5 per cent growth would result in the sale of some 16.5 million passenger vehicles -- cars, vans, sports utility vehicles -- over next five years, compared to 18.5 million that would have come if the economy grows by 9 per cent a year on an average. So, there will be less sale by 2 million passenger vehicles, because the economy can’t grow by 9 per cent. If the economy grows by 5 per cent, sales would be fewer by 4 million vehicles.

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