India's real GDP growth likely to be 5.2 pc this fiscal: EIU

India's real GDP growth for the current financial year is likely to be 5.2 per cent as muted business confidence, subdued demand conditions and concerns in the financial sector are hurting investments, according to the Economist Intelligence Unit. According to the the Economist Intelligence Unit, annual real GDP growth dropped to a six-year low of 5 per cent in the second quarter and data from the third quarter show "little sign of improvement".

India's economic growth has slumped for the fifth straight quarter to an over six-year low of 5 per cent in the three months ended June as consumer demand and private investment slowed amid deteriorating global environment. "Consumer and business confidence are low, car sales plunged by 30 per cent year-on-year in July. Credit growth remains hobbled by problems in the financial sector, which is hurting investment," EIU said in a report.

In order to boost growth and investments, the government unveiled stimulus measures, including over 100 bps of rate cuts, reduced corporate taxes and other measures aimed at boosting consumer spending. "However, we remain pessimistic about the government's efforts to reform the difficult business environment, which represents a bottleneck for growth," EIU said.

Battling a six-year low economic growth and a 45-year high unemployment rate, the government on September 20, slashed corporate tax rates for companies by almost 10 per cent to 25.17 per cent. The report further noted that from an international perspective, India's decelerating growth represents a drag on global economic expansion, which we expect will reach its lowest level since 2009, at 2.9 per cent (at PPP exchange rates).

"Next year we expect India's growth will rebound to 6.7 per cent, in line with consensus, as stimulus measures introduced in the current fiscal year bear fruit and as more headway is made resolving problems in the banking sector," the report said.