With first quarter GDP growth rate crashing down to 5 per cent against a general consensus of 5.7-5.8 per cent, the Indian economy is now looking at a below 6.5 per cent growth in 2019-20 unless something drastic happens in the economy.
Most economists and analysts had predicted the full-year growth rate of 6.7 -7 per cent in the current financial year based on the assumption that the first quarter growth rate would be around 5.8 per cent.
The lower than expected first quarter numbers may now lead to revision of the 2019-20 growth estimate figures even if some agencies might like to see the second quarter numbers before a revision.
Already rating agencies like CRISIL and ICRA are looking for a downward revision. CRISIL is likely to come out with a revised number on 3 September. It had on August 1 estimated a growth rate of 6.9 per cent growth in 2019-20 - a 20 basis points cut from its earlier estimate of 7.1 per cent.
Rating agency ICRA is likely to peg the growth rate between 6.3-6.5%.
Meanwhile, India Ratings, which came out with its full year growth estimate of 6.7% this week, is likely to wait for some more data before revising their full-year estimate. Indian Ratings had recently predicted a 5.7% growth in the first quarter.
Sunil Kumar Sinha, principal economist, India Ratings, told BusinessToday.In: "Although Q1 GDP at 5% is lower than our expectation of 5.7% but I may get covered up in the remaining quarters. Therefore, we would like to watch some high frequency data for few months before taking a call."
Also read: India's GDP growth slips to 6-year low of 5% in April-June quarter
CARE Ratings also said they would not immediately take a call on the full-year estimates.
Earlier last month, the Reserve Bank of India had forecast a 6.9 per cent GDP growth in 2019-20 even as international agencies such as International Monetary Fund and Asian Development Bank had pegged the growth rate at 7 per cent.
However, a Delhi-based think tank National Council of Applied Economic Research (NCAER) had forecast that economic growth could slow down to 6.2 per cent in 2019-20 compared to 6.8 per cent in the previous year.
When asked if the government still expects to achieve a 7 per cent growth in the current financial year, the chief economic adviser (CEA) Krishnamurthy Subramanian said: "This is still the first quarter and as there are some green shoots which would start accelerating in the remaining quarters. So we will have to wait and watch."
The CEA said that significant upwards trend in electricity and power generation at 8.6 per cent along with growth in credit at around 12 per cent indicates there are some green shoots towards a higher growth rate.
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