As India’s fiscal year ends and a new one begins, economists that answered Reuters’ poll forecast a lower rate of Gross Domestic Product (GDP) growth this fiscal year than the previous forecast.
Reuters had conducted a survey between April 15 to 24 on 54 economists. As for its result, most respondents stated that India’s GDP growth would likely drop to 6.3%, lower than the 6.5% forecast in March but higher than the International Monetary Fund’s estimate of 6.2%.
Although India is the world’s fifth-largest economy, its economic stage has always been a difficult path. Every year, the nation fails to find a high paying job for millions of career starters, and there is also a decade of stagnant investment in the private sector.
The Indian government tried raising its infrastructure spending but the stagnant and the proposed 26% U.S. tariff on Indian goods imports may ruin all of its effort. Kunal Kundu, India economist at Societe Generale, stated that the solution is a campaign similar to the one in 1991.
Back then, former Prime Minister Manmohan Singh, finance minister at that time, made several reforms that attracted foreign investment and opened India’s economy. Kundu stated that now is the perfect opportunity for that campaign or India may fail to become a developed nation.
60% of economists speculated that the tariff also has an impact on India business sentiment negatively. Kanika Pasricha, chief economic advisor at Union Bank of India, stated that no company would like to invest in this volatile environment.
There is also an estimation that the Reserve Bank of India would cut the interest rate to 5.75% in June and then to 5.50% in August. This is due to the fear of possible U.S. recession and the position of consumer inflation rate that is below the 4% medium-term target.
