India’s economic growth is expected to remain flat at 7.1 per cent in current fiscal as investment is still weak and government spending might not be as high given the fiscal consolidation, says an HSBC report. According to the global financial services major, the GDP growth momentum is slowing since mid-2016 and this trend is expected to continue going forward.
“Looking ahead, our below-consensus view is that growth will remain flat at 7.1 per cent in 2017-18,” HSBC Chief India Economist Pranjul Bhandari said in a research note. According to official data, India’s growth rate slipped to 6.1 per cent in the January-March quarter and 7.1 per cent during 2016-17.
The slowing momentum in GDP growth rate is expected to continue as investment is still weak, while government spending may not remain as high given the fiscal consolidation path and the rise in exports over the last few months are showing some signs of moderation.
Notwithstanding the fact that rural growth could come in high if rains are strong, but that would just about offset the weakness from other sectors, it added.
Regarding price rise, HSBC noted that a negative output gap is expected to keep inflation at low levels and the Reserve Bank is likely to acknowledge this in the upcoming policy review meet.
“We expect the RBI to acknowledge in the upcoming June 7 meeting that inflation has trended lower than expected. We expect the RBI to keep rates on hold over the foreseeable future,” HSBC added.
The Reserve Bank in its monetary policy review meet on April 6 kept the repurchase or repo rate — at which it lends to banks — unchanged at 6.25 per cent, but increased reverse repo rate to 6 per cent from 5.75 per cent.