After world's leading rating agency, Moody's slashed India's GDP growth forecast to 6.2 percent for running calendar year, Fitch India Ratings and Research has lowered its GDP growth forecast to a six-year low at 6.7 per cent in the current fiscal. Earlier, Fitch has projected India to grow at a rate of 7.3 percent in running financial year.
Moreover, Fitch further argued that major growth-engine of the economy struggling, the economic slowdown is expected to continue and the April-June GDP figure could slip to 5.7 per cent.
The agency does not believe that private investment, one of the major drivers of economic growth is expected to be take-off up anytime soon. It also added that the manufacturing sector has not been working at its optimised level and capacity utilisation has remained in the range of 70-76 per cent since FY14.
Companies would shy away from investing in the economy unless it reaches the optimum level. Fitch further added that stress in real estate will be continued for the moment. Fitch highlighted major reasons that have pulled down including slowdown in consumption, delayed and uneven progress of monsoon, a decline in manufacturing activities, and the inability of Insolvency and Bankruptcy Code (IBC) to resolve cases in a time-bound manner and rising global trade tension impacting exports.
Calling Finance Minister Nirmala Sitharaman's stimulus package for the automobile sector "too little, too late" to prevent a further drop in vehicle sales, Fitch Solutions Macro Research said that the measures are only going to support the sector in the medium term. Last week, Sitharaman has announced a slew of measure to boost the investor's sentiments and spur growth in auto and banking sector. The government announced major relief to these sectors which included a reduction of taxes, improvement of liquidity in the banking sector (formal and shadow), increased government spending on auto and infrastructure, and accelerated refunds of goods and services tax (GST).
"We believe that this initial stimulus package is too little, too late to prevent a contraction in vehicle sales in FY2019 (April-March) as the decline in the automotive sector has already gained momentum, and will, therefore, be difficult to stop," Fitch Solutions argued. It also said that the announced package would not be enough for the auto industry and auto sales may shrink by 11.8 per cent by the end of this year.