India's GDP To Come Down To 6.9%: BofA-ML

Posted By: Staff
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A Bank of America Merrill Lynch (BofA-ML) report has said that the Indian economy is going through a shallow recovery and GDP growth is expected to come down to 6.9 percent this fiscal following demonetisation.

Commenting on the issue, a BofA-ML Official told the media, "We cut our growth forecasts by about 50 bps to 6.9 percent in FY17 and to 7.2 percent in FY18 after September growth disappointed at 7.3 percent with demonetisation set to hit activity in December as well."

India's GDP To Come Down To 6.9%: BofA-ML
"India's GDP accelerated to 7.3 percent in the September quarter, pushed mainly by farm output, although the momentum may be hit in the coming months owing to demonetisation. We expect banks to cut lending rates after the RBI cuts policy rates by 25 bps on December 7, to cushion to some extent the contractionary impact of the adverse wealth effect on discretionary demand," he added.

The report further added that the turnaround in the economy in the coming months should be driven by a pickup in consumption, driven by the 7th Pay Commission award and better rains, rather than investment, although an adverse wealth effect from demonetisation should dampen demand in the first half of 2016-17.

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