Crisil Estimates India’s GDP Growth at 7.9%

The domestic rating agency Crisil has estimated the GDP growth of India at 7.9% for the fiscal year 2016 provided the Monsoon remains normal and the government implements the announced reforms.

Flash points

• The estimated GDP growth remains to be the highest prediction so far pointing at 9% growth as estimated by Crisil
• The chief economist pointed that it is possible with the Monsoon being normal and the implementation of the economical reforms gearing up to achieve the target
• He also explained that compared to the deficit rains of 2014,2015 the likely expectation of Normal Monsoon could provide life to agriculture and its growth likely to be at 4% at the lower base level
• The growth of bank sector will lag due to the piling up of NPA and other assets that possibly could slip into this category
• However the infusion of capital into the PSU Banks and other reforms if implemented can provide slighter relief to the banking sector
• The oil prices will continue to remain soft making the macroeconomic indicators-fiscal deficit and inflation will be under control
• He called the Budget to be one with realistic growth and achievable revenue targets
• He also predicted the growth of Corporate sector other than oil and finance sector at 4% in 2016 and 8-9% in 2017
• UDAY scheme is likely to save 12000 crores and other changes in Capital recognition likely to bring in 37000 crores for lending

Analysis of banking sector

• The NPA’s of banks will rise to 8% or 8 trillion
• The capital requirement of banks will grow further in order to stick to the Basel III regime and the state lender banks will require 1.7 trillion by 2019
• Only 10 PSU’s out of 26 met the capital requirement in 2016 compared to 25 in 2015
• The marginal cost of funding based lending rate calculation is likely to trim the interest rate of banks by 0.10 percent
• The PSU’s are likely to notch up the credit growth by 11 percent during 2017

Points to note

• CRISIL-Credit Rating Information Services of India Limited
• Chief economist of CRISIL– Dharmakirti Joshi
• MD & CEO of CRISIL-Ashu Suyash
• Headquarters-Mumbai