The output gap remains negative and the domestic economy is facing headwinds especially on the global front. The need is to strengthen domestic growth impulses by spurring private investment which has remained sluggish. The resolution of the bad loans will be an immediate concern for the RBI to issue revised directives to its member banks.
Fitch Ratings has rated Indian Economy at BBB- showing lowest investment grade rating which has remained unchanged for the last 13 years. Election campaign promises to support farmers'incomes including direct cash transfers and farm loan waivers will add to spending measures in FY 2019-20. Next government is likely to have a smaller majority in the Lok Sabha and face problems in garnering support for major policy reforms such as GST.
According to Fitch, the Indian economy will grow by 6.8% for the FY20. The RBI also expects the growth rate to remain at 7.2% in fiscal 2019-20. Capacity utilization still remains well below 80% and gross fixed capital formation has plunged below 30%. The only way for growth to pick up momentum is for banks to start lending again and for the government to revive public-private partnership (PPP) in the infrastructure incorporating the right lessons from the past mistakes. The new government should prioritize taking immediate economic reforms to take India to double-digit economic growth from the last years 7%.
The Government is close to meeting the fiscal deficit target of 3.4% of gross domestic product(GDP) for FY19. In the light of above Economic Challenger has brought out its April-June 2019 issue. A close look to contents will make it amply clear.