New Delhi: Ind-Ra has revised India's economic growth forecast to 7.8 percent for the ongoing fiscal on better monsoon, but said the economy is just "chugging along" despite the euphoria emerging after the formation Modi government at the Centre.
"India Ratings and Research (Ind-Ra) has revised its gross domestic product estimate for 2016-17 upwards to 7.8 percent from its earlier forecast of 7.7 percent. The upward revision has been prompted by the progress of monsoon and the sowing of kharif crop so far," the ratings agency said in its research report on 'Review of the Economy'.
With the area under kharif crop sowing 5.7 percent higher than a normal area so far, it said the agency expects the farm gross value added to grow 3 percent in the current fiscal as against 2.8 percent forecasted earlier.
It said the positive impact of monsoon on agriculture will support the overall GDP growth with its backward and forward linkages.
On the macro economy, it said India's growth is in motion but not accelerating.
"Despite the euphoria and the hope that accompanied the change in the Union Government in 2014, the economic growth witnessed since then can at best be described as chugging along," it said.
However, Ind-Ra said it is not to say that the incumbent government has not done anything to revive the growth, several initiatives have been taken for encouraging manufacturing and improving on ease of doing business.
Even though services sector shows its resilience and continues to be bellwether of the economy, unsatisfactory progress on the industrial front is a cause of concern, it added.
With weaker industrial growth in continuation, Ind-Ra expects the sector gross value added (GVA) to grow 7.2 percent, unchanged from previous forecast.
As investment demand is absent, industrial growth is coming from consumption demand, it said.
"Moderation in both inflation and lending rates of banks is aiding the consumption demand in urban areas. Salary revision of central government employees due to the award of the recommendations of the 7th Central Pay Commission will further aid the urban consumption demand," it said.
The wait is getting longer for an investment recovery which is the main reason to hold acceleration in industrial growth, Ind-Ra said.
The incumbent government has taken several initiatives to revive private investment as also the manufacturing sector growth in the country. However, all this has failed so far to rekindle the animal spirit in the economy, it said.
Corporates, particularly in infrastructure, power, iron and steel and textile sectors, are either repairing their balance sheets or saddled with stagnation or even decline in capacity utilisation.
Ind-Ra, therefore, expects investments to grow 5 percent in 2016-17, mainly driven by the government capital expenditure.