Indian economy will grow below its potential in 2019-20, said a report from the Hong Kong-based The Economist Intelligence Unit (EIU) while warning it is set to lower its own current estimate of 7.2 per cent for the country's GDP growth rate in its next forecast round.

"The government's continued expansionary fiscal stance will remain broadly supportive of growth. The new government will present its budgetary plans for the remainder of 2019/20; as it seeks to attract and retain coalition partners, fiscal consolidation efforts will be put on the backburner and public spending will remain strong, contributing to overall economic activity," the EIU report said.

"However, given a generally weaker global economy and structural challenges such as high unemployment, the economy will continue to grow below potential in 2019/20. In The EIU's next forecasting round, The EIU will therefore make a downward revision to The EIU's current forecast of 7.2 per cent real GDP growth in this fiscal year, to reflect the cooling economy."

Both Asian Development Bank (ADB) and Reserve Bank of India (RBI) earlier this month cut their 2019-20 growth projection for India to 7.2 per cent from 7.4 per cent earlier, blaming rising risks to global economic growth as well as weakening domestic investment activity.

In India, growth is projected to pick up to 7.3 per cent in 2019 (2019-20) and 7.5 per cent in 2020, the International Monetary Fund (IMF) said in its World Economic Outlook report which is a downward revision in its India growth forecasts of 20 basis points each in 2019-20 and 2020-21 from its outlook released in January.

The Indian economy grew 6.6 per cent in the December quarter, the slowest in five quarters, prompting the Central Statistics Office (CSO) to trim its 2018-19 forecast to 7 per cent in February from 7.2 per cent estimated in the previous month.

"India's economy has lost some of its momentum in the recent quarters on the back of weakness in the manufacturing sector. Several factors are responsible for this deceleration, including tepid consumer sentiment and persistently weak growth in credit to small businesses.

"This broad frailty is expected to persist through 2019, as The EIU does not expect a strong turnaround in the economy, although India will remain among the fastest-growing Asian economies," Shreyans Bhaskar, Research Analyst at The Economist Intelligence Unit (The EIU), said .

India's growth prospects, when seen in comparison with other regional economies, still remain relatively positive. Business sentiment is expected to register a recovery in the aftermath of the general election, which will aid growth, he said.

The EIU provides country risk and industry analysis across 200 countries.

--IANS

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