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28-Jul2016

Crisil pegs India's GDP growth at 7.9% in FY 17 on back of good monsoon

Rating agency CRISIL in its latest report has pegged India's economic growth at 7.9 per cent in the current fiscal year, assuming a good monsoon. It expects agriculture to grow by 4 per cent and consumer price inflation to be restricted to 5 per cent in 2016-2017. However, it also cautioned that stress in rainfall in certain parts of the country and excess downpour in some other regions may be a cause for worry. Sub-normal monsoons have taken a toll on agricultural production in the last two fiscals and Agriculture GDP growth averaged 0.4% in the last two fiscals, much below the long-term trend of 3%. Crisil has developed a Deficient Rainfall Impact Parameter (DRIP) index, which measures the impact of rainfall levels on each crop across geographic regions

Crisil further stated that despite a slow start in June, rains have caught up and were just 1 per cent below normal as of July 25. This has helped reservoirs to bounce back from the lows seen in the beginning of the fiscal, boosting farmers' confidence. It added that due to good monsoon, backed by favourable temporal and spatial distribution, agriculture growth can surge to six per cent from a weak base of last year and, therefore, push up GDP growth. On inflation, it expects ample kharif production to boost supply and bring down food inflation. This will help offset sticky services inflation and higher crude oil prices.

The report said it does appear that the farm sector will perform well this year and help the economy in two ways -- keep prices under control and provide higher incomes to the farmers. Accordingly the rural consumption is expected to revive, pushing up private consumption which will raise capacity utilisation and kick-start the investment cycle by the end of this fiscal. CRISIL estimates consumption-oriented sectors to gain, especially as rural demand soars. These include automobiles, particularly two-wheelers, and consumer durables. On the inflation front, it expects ample kharif production to boost supply and bring down food inflation. This will help offset sticky services inflation and higher crude oil prices.




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