A Deutsche Bank research report has predicted that the Indian economy and its GDP will likely grow at the rate of 7.5 per cent for the current financial year and added that the economy is witnessing a “cyclical upswing”.
“Our current growth forecast for 2018-19 is 7.5% (RBI estimate is 7.4%), which will mark an improvement from the 6.7% likely outturn in 2017-18,” the global financial services major said.
A revival in investment activity in the Indian economy will help it to grow at 7.4 per cent in the current financial year compared to the growth rate of 6.6 per cent in 2017-18, expects the Reserve Bank of India (RBI). But some of the factors that could turn out to be strong headwinds for the economy and pose a risk to the baseline GDP estimate, including the potential negative influence of frauds that took place in banking sector on credit, overall growth, the risk of an earlier than anticipated rate hike cycle from the RBI and the higher global oil prices, the report notes.
The price of Brent crude at present are ranged around $75 a barrel which is 12 per cent higher compared to the price at the end December 2017. The research report from the Deutsche Bank also notes that while there can be a reduction of about 10bps in the growth rate of the economy by an increase of $10 in the price of oil. On the other hand, there can be a reduction of anything between 15 and 20 bps of the GDP growth rate by the other mentioned factors. The report also noted that the economic momentum in the Indian economy will continue to get enhanced “sequentially in 2018-19 and beyond” except for the fact that the pace of recovery of the economy could be hampered by the higher oil prices.
“Capacity utilisation has started to improve, which should incentivise private sector capex recovery with a lag, GST collections have picked up thanks to the implementation of e-way bill, NPA resolution is underway and the government is likely to remain focused on pushing infrastructure investment, which should bode well for the growth outlook going forward,” the report added.
(Adapted from Livemint.com)