World Bank cuts India’s GDP growth to 6.5%
Citing the deteriorating global scenario, the World Bank on Thursday downgraded India's GDP forecast for the current fiscal to 6.5 per cent.
The FY21 consolidated fiscal deficit of the Centre and state governments might touch 13 per cent of GDP, said SBI Ecowrap in a report on Thursday.
The report said that as per current trends, the government sticking to borrowing programme though will please the debt markets, but “looks challenging given the current exceptionally weak government finances”.
“Net revenue slippage of the Centre, after taking into account increase in excise duty gains along with the shortfall in tax and non-tax revenue and disinvestment receipts, is likely to come around Rs 7 lakh crore in current fiscal,” the report said.
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“We are thus expecting that consolidated fiscal deficit of the Centre and States will touch 13 per cent of GDP as per current trends.”
According to the report, sticking to the budgeted borrowing numbers for now at “least on paper thus indicates large expenditure cuts that will be clearly inimical to growth”.
“In fact, nominal GDP growth number is likely to decline below FY19 levels,” the report said.
“The significant government cash balances also indicate that the government is currently not spending and thus September is unlikely to be much better compared to August.
“Besides, the report cited that incremental bank credit growth lost much of the momentum in August.
“The bad thing is that incremental bank credit that increased in June and July by Rs 392 bn declined in August by Rs 360 billion, which is mainly due to decline in credit to personal loans and infrastructure segments,” the report elaborated.
Credit to NBFCs, however, jumped in August after 3 successive months of decline.
“Furthermore, the company said that its bottom up approach suggests that deposit and credit growth during the current unlock 4 regime witnessed large declines, with the maximum decline in savings bank deposits and even bank advances happening in this period across all lockdown and unlock phases. “The consumer deleverage also declined in August indicating the stress on household balance sheets now emerging with gusto,” the report added.
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