MUMBAI: Rating agency CRISIL has drastically cut the GDP forecast for the current fiscal to 5.1 per cent from 6.3 per cent estimated earlier, looking at the weak growth in the first half and “just a mild recovery in the second half”. “As the slowdown deepens, we revise our GDP growth forecast,” CRISIL said in a report, titled ‘Pinned down to 5.1 per cent’, on Monday.
The second half of the fiscal will see a pick-up in growth led by an adequate monsoon, government spending and support to the rural economy. “Early indicators show the growth picture for Q3 is hazy, but there could be some signs of improvement,” CRISIL said. Though auto sales continue to be negative, the pace of decline is slowing, and government spending on infrastructure is ticking up, which should benefit the related sector, it said.
It sees the second half recovering to 5.5 per cent from 4.8 per cent in the first half. The second quarter number of 4.5 per cent, the lowest since Q4 of FY-13, came as a shocker. Government capex, which has been the major support in the absence of private capital investment, rose 6.5 per cent between April and August, compared with 16.4 per cent in the previous year, CRISIL said.
This, it said, had a negative rub-off effect on sectors like cement and steel. Road construction under the Pradhan Mantri Gram Sadak Yojana has slowed down to 35 km per day from 56 km last fiscal, and Pradhan Mantri Aawas Jojana, which is helping low-cost affordable housing, crashed to 31,000 per month from 8 lakh.
The financial system is clogged, constraining credit, it said.“With government wherewithal also limited, the slowdown can stretch,” it added.