Over the last couple of quarters, the growth rate in India has been crashing, with the Reserve Bank of India, as well, now well aware of the problem. While analyzing the monetary policy on 5th December, the central bank dropped the prediction to 5 percent for the financial year 2019 to 2020, i.e. a decrease of 1.1 from 6.1 percent in the month of October 2019 policy review, as well as, 2 percent lower than the projection of June 2019.
Analysts at CLSA forecasted a likely growth rate of 5% for the economy of India in the financial year 2019 to 2020 with a lower number of risks. Their uttermost scenario for the financial year 2019 to 2020 is 50 basis points below this forecast at 4.5 percent.
The chief economist at CLSA, Eric Fishwick, passed a statement saying that India is in the mid of a stark credit contraction that began with the liquidity squash prompted by the crisis in the non-bank finance firms, which has now spread to firms that take a deposit as well. India is growing at a rate that is below historical trend and there will be a bit of pressure on extensive consumption aggregates. The corporate tax cuts introduced by Mod are daring, however, will be taking time for gaining traction. The recovery of India will postpone until late 2020.
At the same time, there has been revising of the consumer price inflation projection by RBI upwards to 5.1 percent to 4.7 percent for the 2nd half of the FY20 and 4 percent to 3.8 percent for the first half of FY21. A couple of days ago, the gross domestic product print for the Q2 of the ongoing fiscal came in at 4.5 percent i.e. the weakest in the past 6 years.