Banking frauds, muted GST collections to keep risk to growth elevated: D&B

Business Standard By Press Trust of India March 22, 2018 19:20 IST

Handling the emerging frauds in the banking sector coupled with likely ripple effects, muted GST collections and the protectionist policy imposed by the US are some of the factors that are likely to keep risk to growth elevated, says a report.

As per D&B economic forecast for March 2018, the government faces a challenging scenario of managing the growth momentum.

While India has once again regained the title of one of the fastest growing economies in the world with Q3 FY18 GDP growth data, the government faces a challenging scenario of managing the growth momentum.

"Handling the emerging frauds in the banking sector coupled with its likely ripple effects, dealing with the farmer's agitation over loan waivers, muted GST collections, deteriorating conditions in the telecom and power sector and the protectionist policy imposed by US are likely to keep risk to growth elevated," said Arun Singh, Lead Economist, Dun & Bradstreet India.

Investment cycle in the economy needs to be revived in a sustained way, he said.

However, meeting the financing needs of both the private and the government will be constrained in the short term, in the light of mounting losses and capital erosion in the public sector banks, Singh added.

D&B expects the Index of Industrial Production (IIP) to grow by 7.5-7.7 per cent during February.

The thrust on infrastructure and construction activity in the Union Budget is likely to aid the demand scenario further, the report said.

"Expecting a significant increase in government spending amidst the growing pressure of farm loan waivers, low GST collections and poor health of PSU banks seems challenging. Managing balance sheets of government and public sector banks while ensuring an employment led economic recovery are the two difficult tasks that the central government has to manage deftly Singh added.

D&B expects CPI inflation to be in the range of 4.4-4.6 per cent and WPI inflation 2.6-2.8 per cent during March, respectively.

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