x Abu Dhabi, UAEWednesday 26 July 2017

Indian sectors face falling revenue

Two out of three sectors in India are expected to experience a decline in revenues this year amid decade-low economic growth, a report released yesterday showed.

Farmers work in a paddy field near Allahabad, India. One of the bright spots for India, highlighted in a report, is agriculture. Rajesh Kumar Singh / AP Photo
Farmers work in a paddy field near Allahabad, India. One of the bright spots for India, highlighted in a report, is agriculture. Rajesh Kumar Singh / AP Photo

Declining revenues are expected for two out of three sectors in India this year amid decade-low economic growth, a report released yesterday showed.

"What stresses nearly a quarter of the companies analysed is the demand slowdown," according to Crisil, a Standard & Poor's ratings and research firm based in India. "The collapse of the investment cycle will severely dent infrastructure, capital goods, automobiles and real estate sectors."

These findings resulted in Crisil bringing down its forecast for industrial growth to 1 per cent, the nation's lowest level in 20 years.

The report on India's economic state involved collecting data from 2,481 investment-grade rated companies across more than 70 sectors in the country. It comes at a time of slowing economic growth, a currency that has hit a series of record lows in recent weeks and a wide current account deficit.

Crisil expects GDP growth to hit a decade low of 4.8 per cent in the current financial year, which began in April and runs to the end of March.

"What this means is that the Indian economy will stay in an L-shaped trajectory, which is very different from the V-shaped recovery that we saw after the Lehman crisis," said Roopa Kudva, the managing director and chief executive of Crisil.

"We believe that we have bottomed out, so I don't think it's going to get much worse. But will we see a rapid bounce back? I think no. I think the bounce back will be slow and the bounce back will be gradual. There will be a pick-up next year but we?re not expecting a sharp bounce back."

Crisil said the rupee could rebound to 60 against the US dollar by March compared with its recent record low of 68.84, as it forecasts that India's current account deficit will decline to 3.9 per cent of GDP.

One of the bright spots for India highlighted in the report was the agricultural sector. Good rains this year are set to help farmers to generate healthy revenues, which then feed into other sectors as they spend their earnings.

"Agriculture is set to surprise on the upside because of a bountiful and well-distributed monsoon," Crisil said. "Farm GDP growth could more than double from last year's 1.9 per cent to 4.5 per cent. This will help check food prices and support rural consumption."

If the agricultural sector manages to grow at 6 per cent, India's GDP growth could be 5.2 per cent this year, up from Crisil's forecast of 4.8 per cent, the report stated.

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