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India's growth rate likely to improve to 7.3% in FY20: Crisil

Crisil Ratings in its latest 'India Outlook FY20' report has stated that India's economic growth may improve to 7.3% in the fiscal year 2019-20 (FY20), provided that there are normal rains, oil prices lower than 2018 and a stable political outcome of the general elections. It also said that the country is expected to clock a growth rate of 7.2% in the current financial year (FY19), up from 6.7% in 2017-18. The report noted that with the government likely to stick to a fiscal consolidation path, the pick-up in growth is expected to be only gradual.

As per the report, a change in the growth mix is on cards, with private sector likely to take over the baton from the government. Highlighting that fiscal health remains a key risk, it said the fiscal deficit is likely to be 3.3% of the gross domestic product (GDP) in the next fiscal. The deficit is budgeted at 3.3% in the current fiscal. However, the rating agency cautioned that if the general elections this year yield a fractured mandate and derail/delay the process of reforms, the implications on sentiments, investments and growth could be adverse. Besides, it said global crude oil prices are expected to soften to settle at around $60-65 average per barrel in fiscal 2020, compared with $68-72 average per barrel in fiscal 2019 as overall global demand slows. Though, some price pressure could be felt in response to the recently announced supply cuts by the Organization of Petroleum Exporting Countries (OPEC).

On the inflation front, it said fiscal 2019 would be the second consecutive year of sub-4% Consumer Price Index (CPI)-based inflation, from an average 4.5% in fiscal 2017, CPI inflation fell to 3.6% in fiscal 2018. It further expects that inflation at 3.7% for fiscal 2019, given the continuous and sharp decline in food prices and slowdown in global crude oil prices compared with a few months ago. It said current account deficit (CAD) would reduce to 2.4% of GDP in fiscal 2020 from 2.6% in fiscal 2019. Moreover, the rupee will remain volatile and settle at 72 to a dollar on an average by March 2020, compared with an estimate of 71 to a dollar by March 2019. It added that domestic interest rates, which had risen last year, are expected to soften in fiscal 2020.

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