Rating agency ICRA expects gross value added (GVA) growth to rise by 50 basis points in 2018-19 to 7 per cent.
This forecast is contingent on a normal monsoon, a commitment towards fiscal consolidation at the Central and State level, and the commencement of broader efficiency gains related to GST, it said in a Macro Trends report on Tuesday.
ICRA sees GVA coming in at 6.5 per cent in the current fiscal year. “For 2017-18, we continue to expect GVA growth at 6.5 per cent,” said Aditi Nayar, Principal Economist at ICRA.
For the third quarter this fiscal, ICRA expects GVA at basic prices to record a modest uptick and print at around 6.5 per cent, tempered by the weak kharif harvest and the impact of elevated commodity prices on margins in the manufacturing sector, before rising sharply above 7.5 per cent in the fourth quarter this fiscal. Measuring GVA is important as it is a pointer to where GDP is headed, say economy watchers.
At present, ICRA maintains its baseline expectation of an extended pause by the RBI on policy rates in the first half of Calendar 2018, Nayar said.
The recently released minutes of the Monetary Policy Committee’s (MPC’s) December 2017 meeting as well as the sharper-than-expected uptick in CPI inflation to 4.9 per cent in November 2017 from 3.6 per cent in October 2017 have sparked some concerns of impending rate hikes.
For 12 consecutive months from November 2016 to October 2017, CPI inflation remained below 4 per cent and averaged around 3.1 per cent, benefiting from a favourable base effect, which was correctly anticipated to wane from the third quarter of this fiscal year onwards. “Given that the MPC responded to this period of transient ‘low’ inflation with only one rate cut of 25 bps, we do not expect it to commence hiking rates unless the CPI inflation is forecast to persist above 5 per cent for at least two quarters,” the report said.