India likely to grow 7.9% this fiscal, but rains key: Crisil

Mumbai: Indian economy is likely to grow at 7.9 percent in the current fiscal provided the country receives normal monsoon as it will boost agriculture growth and lift rural demand, says a report.

As per the rating agency Crisil's latest report, GDP is expected to grow by 7.9 percent in 2016-17 as against 7.6 percent in the previous fiscal if "monsoon is normal and global situation does not deteriorate from here".

"If the rains are normal, it would give agriculture a one-time growth kick, particularly given the low-base effect of the two previous years... That should lift sagging rural demand and by extension, overall GDP growth," it said.

Accordingly, the rating agency expects the Reserve Bank of India to continue its accommodative monetary stance and cut the repo rate by another 25 bps this fiscal.

Noting that the economy's modest recovery has been shaped by "good luck" on crude oil and commodities, Crisil said the medium-term outlook will be shaped by progress on initiatives such as cleaning up of bank balancesheets and successful implementation of the goods and services tax (GST).

Besides, financial inclusion through initiatives like Jan Dhan and digitisation, among others, will also potentially have a transformative impact on the economy's growth, it added.

On the employment front, Crisil Chief Economist Dharmakirti Joshi noted that the government needs to bring in about 6,000 jobs a month, but it is falling short of the target.

As per the report, addressing core physical infrastructure issues such as seamless availability of electricity, creation of road network and social aspects like health and education are crucial to sustaining growth.

"The current fiscal, therefore, will be closely watched for more reforms and relentless implementation of executive and policy actions already announced," the report said.

According to Crisil, India's ranking on ease of doing business and competitiveness is expected to rise in 2016, given the government's reforms initiatives.

However, it observed that steps to raise efficiency in goods and labour markets, health, education as well as technological readiness are found to be lacking.