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Growth, Rate-Cut Revisions By Economists After Shock GDP Slump: Report

The slump will put the onus on the RBI to continue cutting interest rates after 110 basis points of easing already this year, the economists said.

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Growth, Rate-Cut Revisions By Economists After Shock GDP Slump: Report

The government is sticking to its 7 per cent growth projection for the fiscal year.


Highlights

  1. Data showed GDP rose 5 per cent in the June quarter from a year ago
  2. Economy grew at the slowest pace in six years in the April-June period
  3. Goldman Sachs lowered the growth projections to 6% for 2019-20

Economists cut their forecasts for India's economic growth and predicted deeper interest-rate cuts after data showed a sharper-than-expected slump in output.

Goldman Sachs Group Inc. and Citigroup Inc. lowered their growth projections to 6 per cent for the fiscal year through March 2020, while Oxford Economics Ltd. said there's a risk the expansion could be weaker than that.

Data late Friday showed gross domestic product rose 5 per cent in the June quarter from a year ago, the slowest pace in six years and lower than all the forecasts in a Bloomberg survey of economists. The weakness was broad-based, with consumption and export growth slowing while investment remained subdued.

The slump will put the onus on the Reserve Bank of India to continue cutting interest rates after 110 basis points of easing already this year, the economists said.

The government -- which is sticking to its 7 per cent growth projection for the fiscal year -- has in recent days announced a number of steps to improve India's longer-term growth, without providing any immediate support. It will merge state-run banks to help spur credit growth, ease foreign investment rules and give concessions on vehicle purchases.

Here's a look at the new projections from economists:

EconomistNew GDP forecastPrevious GDP forecastInterest rate forecast
Citigroup6%7%25 bps cut in October, with 30% probability it could be higher
Goldman Sachs6%6.90%50 bps cut in 4Q vs previous prediction of 25 bps
OxfordBelow 6%-75 bps rate cuts
Nomura Holdings Inc.6%6.50%40 bps cut in 4Q vs earlier projection of 15 bps
Bloomberg Economics6.60%7%-
DBS Group Holdings Ltd.6.20%6.80%15-25 bps cut in both Oct. and Dec.

(Source: Bloomberg)



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