Crisil Research has projected that the Indian economy would grow annually by 6.5 per cent on an average during FY15 to FY19. This is way below the 9 per cent growth rate clocked during FY04 and FY11, briefly snapped by global financial crisis of FY09, it said. Even this projection of 6.5 per cent growth rate is based on the assumption that the Lok Sabha results would throw up a decisive mandate.
Sale of products in various sectors like automobiles, consumer durables, housing, cement, steel etc would be severely impacted as a result of the economy slowing down from the 9 per cent trend growth to expand by just 6.5 per cent.
This would also have an impact on poverty reduction and employment generation as, Crisil Research said in its study ‘Of Growth and Missed Opportunity’.
“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,” it said.
If an unstable coalition comes, economic growth could be stuck at 5 per cent in the next five years, cautioned the research body in its latest study. The economy crawled at a decade low of 4.5 per cent in FY13 and is officially projected to expand 4.9 per cent in FY14.
It, however, did not rule out economic growth rising above 6.5 per cent, but said there is a “natural limit” to it. In any case, going back to 9 per cent growth is difficult, it said.
“If everything falls in place, growth could rise much above 6.5 per cent… but nowhere near the 9 per cent heyday,” it said. Crisil chief economist DK Joshi attributed difficulty in going back to 9 per cent growth rate to bad health of financial sector, excess capacity in companies particularly auto, no room for counter-cyclical measures both in monetary and fiscal terms and pending environment issues.
The 6.5 per cent growth would result in the sale of some 16.5 millon passenger vehicles (cars, vans, sports utility vehicles) in five years from the current financial year, compared to 18.5 million that would have come if the economy grows by 9 per cent a year on an average. So, sales will drop 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.
Similarly, 6.5 per cent growth would lead to less sales of scooters by 10 million, of commercial vehicles by 0.5 million, compared to 9 per cent growth, it said.
Sales of television sets will be fewer by 13 million, refrigerators by 6 million, washing machines by 4 million and air-conditioners by 6 million, the research firm said.
With respect to housing, the study estimated that 1.13 million units would be sold in ten major cities over the next five years, if India manages to log 9 per cent GDP growth and just over 1.03 million units at its projection of 6.5 per cent. Similarly, it estimated less sale of cement by 125 million tonnes and steel by 42 million tonnes.