Agencies

India Ratings and Research (Ind-Ra) expects a marginal improvement in economic growth in next fiscal, however, it cautioned that the downside risks persist. Ind-Ra expects gross domestic product (GDP) to grow at 5.5 per cent in FY21.The ratings agency sees some improvement in fiscal 2021 but said the Indian economy is stuck in a phase of low consumption as well as low investment demand.“We believe a strong policy push coupled with some heavy lifting by the government is required to revive the domestic demand cycle and catapult the economy back into a high growth phase,” Sunil Kumar Sinha, Principal Economist and Director Public Finance, Ind-Ra said.India reported GDP growth rate for September quarter at a 26-quarter low of 4.5 per cent. The government has projected fiscal 2020 growth at 5 per cent, which is a multi-year low. The International Monetary Fund also trimmed its growth projection to 4.8 per cent earlier this week.The current slowdown, in Sinha’s view, is a combination of several factors including an abrupt and significant fall in lending, reduced income growth of households coupled with a fall in savings and higher leverage and inability of the dispute resolution to quickly unlock stuck capital.In recent months, the government has announced a number of steps to shore up the economic growth including a corporate tax rate cut. However, Sinha said they may not help the government in the long term.“We believe [these steps] will come to aid only in the medium term. Therefore, all eyes are on the forthcoming Union Budget,” he said.He also expects the government to miss its fiscal deficit target. Sinha said shortfall in the tax plus non-tax revenue will result in the fiscal deficit slipping to 3.6 per cent of GDP (budgeted 3.3 per cent) in FY20, even after accounting for the surplus transferred by the RBI.