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4 things to know about India’s growth prospects
India’s economy has witnessed a considerable turbulence following the demonetisation drive and the implementation of the Goods and Services Tax.
But slowly, the economy is entering a new phase of growth.
Here are four important things to know about the economy in the coming months.
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India growth story back:
The Indian Meteorological Department (IMD) brings good news regarding the coming monsoon season. The IMD’s forecast says that the country shall experience a normal monsoon during the months of June-September. The IMD shall provide a second update on the monsoon in June. So at this moment, it may be too soon to predict the impact on growth and prices. However, a normal monsoon for the third consecutive year bodes well for farmers and the rural sector as a whole.
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Monsoon cheer:
The Indian Meteorological Department (IMD) brings good news regarding the coming monsoon season. The IMD’s forecast says that the country shall experience a normal monsoon during the months of June-September. The IMD shall provide a second update on the monsoon in June. So at this moment, it may be too soon to predict the impact on growth and prices. However, a normal monsoon for the third consecutive year bodes well for farmers and the rural sector as a whole.
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Inflation spike:
The annual Wholesale Price Index (WPI) based inflation in the country remained broadly unchanged at 2.47% during the month of March. This was a tad lower than the 2.48% rise in February. WPI inflation is an index that tracks the changes in the wholesale prices of goods. But going forward, a rise in WPI inflation is likely to occur according to a report by Kotak Institutional Equities. A rise in global commodity prices of crude oil and metals could create upside risks to input price inflation. WPI inflation could spike to 5% in June 2018 before coming down to 3.4% by March 2019 as per the report.
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Bank reforms required:
India needs to address the problems faced by large public sector banks, according to the IMF. For the economy to sustain the growth momentum, banks need to extend new loans to businesses for future growth or expansion. However, the non-performing loans and rising frauds are slowing the lending process. In addition, RBI wants banks to maintain strong governance and improve its risk management practices. Demands for privatization of PSBs have increased in the past month as a solution. However, the banking sector can truly improve for the better if this is accompanied with reforms in banking regulations, according to the RBI’s Monetary Policy report published soon after the credit policy announcement earlier this month.
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Rs 68.7
The current price of the Indian crude oil basket is already at $68.7 per barrel. However, in its credit policy document published two weeks ago, the RBI has assumed the price for 2018-19 to be $68 per barrel while making near term predictions for inflation and growth. This is likely to put pressure on inflation in the year ahead. It really means borrowing rates are unlikely to come down if oil prices stay high.
