India GDP growth rate to remain flat at 7.1% in 2017-18: HSBC

4 Jun 2017

India’s economic growth is expected to remain flat at 7.1% in current fiscal as investment is still weak and government spending might not be as high given the fiscal consolidation, says an HSBC report.
According to the global financial services major, the gross domestic product (GDP) growth momentum is slowing since mid-2016 and this trend is expected to continue going forward. “Looking ahead, our below-consensus view is that growth will remain flat at 7.1% in 2017-18,” HSBC chief India economist Pranjul Bhandari said in a research note.
According to official data, India’s growth rate slipped to 6.1% in the January-March quarter and 7.1% during 2016-17.
The slowing momentum in GDP growth rate is expected to continue as investment is still weak, while government spending may not remain as high given the fiscal consolidation path and the rise in exports over the last few months are showing some signs of moderation. Notwithstanding the fact that rural growth could come in high if rains are strong, but that would just about offset the weakness from other sectors, the report added.
Regarding price rise, HSBC noted that a negative output gap is expected to keep inflation at low levels and the Reserve Bank of India (RBI) is likely to acknowledge this in the upcoming policy review meet.
“We expect the RBI to acknowledge in the upcoming 7 June meeting that inflation has trended lower than expected. We expect the RBI to keep rates on hold over the foreseeable future,” HSBC added.
The RBI in its monetary policy review meet on 6 April kept the repurchase or repo rate—at which it lends to banks—unchanged at 6.25%, but increased reverse repo rate to 6% from 5.75%.(PTI)