Further demand slowdown on the cards: NCAER

Mumbai: Economic think-tank, National Council of Applied Economic Research (NCAER) on Saturday said India is likely to see a further slowdown in aggregate demand and GDP growth during 2019-20.

NCAER also anticipated a recurrence of the large shortfall in tax revenue observed in 2018-19 but also added that its impact on the total revenue will be moderated on account of the massive transfer of RBI surpluses.

"The credit squeeze for the MSME sector has been aggravated following the default by IL&FS, which hit the NBFCs. We are, therefore, likely to see a further slowdown in aggregate demand and GDP growth during 2019-20 compared to 2018-19," NCAER said.

Its outlook on the industrial sector was also grim as the Q2: 2019-20, the Index of Industrial Production (IIP) showed a year-on-year (y-o-y) decline in growth of (-) 0.4 per cent as compared to growth of 5.3 per cent in Q2: 2018-19.

NCAER's expectation on the agricultural sector's performance, is, however, positive owing to the normal rainfall this year, despite its late arrival. It estimates the output of Kharif foodgrains to be in the region of 149.1 million tonnes, which indicates an increase over last year's record output of 141.7 million tonnes.

"The expected increase in output is attributable to the strong performance of all the three crop groups, viz., rice, coarse cereals, and pulses. The current year's water storage in dams as on October 24, 2019, was 127 per cent of the long-term average, also pointing to an encouraging outlook for the rabi season," NCAER added.