Care sees GDP clipping at 7.5-8% in FY18 if monsoon is normal

Rating agency Care today said it expects GDP growth to accelerate to 8 percent next financial year and flagged monsoon as the only area of concern that may scupper this.

"We expect growth would be in the higher range of 7.5-8 percent next year as against 7.1 percent in this year as per the latest CSO estimate," it said in a statement.

It singled out the monsoon as "the only domestic risk factor" for the domestic economy. Private weather forecaster Skymet yesterday projected a poor monsoon season this year.

The report said government is on its way to introduce the GST which should give confidence to investors. Apart from GST, government has also introduced other reform measures of the administrative front and also in distribution channels.

All these developments should "augur well" for the markets and the interest of foreign portfolio investors (FPI) should be higher, it said.

The overall FPI inflows should move into the range of USD 15-20 billion in fiscal 2017 with equity dominating with USD 10-15 billion and debt with USD 5 billion, it said.

Debt flows would be contingent on the interest rate differential between the Fed induced interest rates in the US and domestic rates, it said, adding domestic rates should remain stable at least in the first half of fiscal 2018.

The report also said RBI will wait for the progress of the monsoon and cut rates only when the scenario is clear and the inflation is below 5 percent.

Many analysts are expecting an acceleration in the GDP growth in the next few years and government has also been spelling out its intention to grow faster at about 8 percent over a sustained period of time.

Given the growth-impacting demonetisation exercise, many analysts are raising question marks over the veracity of the recent set of official figures.