Rating agency Crisil has revised the growth forecast for India for the current financial year sharply to 6.3% from 6.9% projected earlier, after the first-quarter growth rate plummeted to a 25-quarter low of 5%.

Observing that India’s economic slowdown was deeper and more broad-based than suspected, the rating agency said, “A plunge in domestic private consumption demand, slump in manufacturing, halving of merchandise exports growth, and a high-base effect from last year have gnawed away at first-quarter growth.”

Crisil said given the twin trouble of slack private consumption and manufacturing in the quarter, it believed the remaining quarters were unlikely to over reach to take the full-year number to its earlier forecast of 6.9%.

“Therefore, we revise down our growth forecast for fiscal 2020 to 6.3%, from 6.9% estimated earlier. That is under the assumption that the second quarter will see some mild pick-up in growth, which continues through the year,” Crisil said.

Crisil expects growth to get some lift from the low base effect that will now set in. Besides, an easing monetary policy, improved transmission of rate cuts, and the government’s minimum income support scheme to farmers would also feed into consumption.

Sluggish consumption

Crisil said sluggishness in private consumption could be explained by a number of factors, including a possible income slowdown and cost increases, amid other challenges in the automobile sector, slowing activity in real estate, and an overall dent to consumer sentiment.

“In fact, much of this cyclical slowdown has affected sectors that are large employment generators, suggesting that incomes and/or employment growth in these might have suffered,” it said.